Rise in fund listings buoys IPO activity

This article is part of
Spring Investment Monitor – March 2016

Rise in fund listings buoys IPO activity

While many investors look to take advantage of market conditions to snap up a bargain company or add to positions, new launches can also provide attractive opportunities.

In its recent IPO Watch Europe 2015 report, PwC records a 16 per cent increase in the proceeds raised from initial public offerings (IPOs) across Europe to €57.4bn (£44.3bn) in 2015. This is in spite of the actual number falling from 376 in 2014 to 364 a year later.

The research shows that of the stock exchanges across Europe, London remained the most active market with 92 IPOs in the year raising roughly £11.9bn, even though the level of proceeds was down 16 per cent from the £15.7bn raised in 2014.

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Viv Maclachlan, director at PwC’s UK capital markets group, notes in the report: “We rounded off last year with six bumper IPOs, which really saved the day from an annual IPO proceeds standpoint and took us to the highest proceeds since 2007. But that statistic masks the fact that overall it was not a particularly memorable year for London IPOs.”

However, the PwC report points out that 2015 was a strong year for fund listings, which it says accounted for roughly 25 per cent of the total London IPO proceeds in the year.

Figures from the London Stock Exchange (LSE) for December show there were 25 fund listings on the facility raising approximately £3.3bn, an increase of 22.5 per cent compared with the previous year.

Key among these was the well-publicised launch of the Woodford Patient Capital Trust, which raised £800m, making it the third largest UK IPO in 2015, according to PwC’s report.

The focus of the Woodford trust on growing technology and biotech businesses demonstrates a rising trend towards more alternative companies and opportunities.

Likewise, the LSE notes that 2015 saw a “diverse range of funds, structures and innovations” coming to the market, including opportunities in the peer-to-peer lending space.

Darko Hajdukovic, head of research and product innovation in primary markets at the exchange, explains: “Last year saw an impressive increase in fund listings on the LSE from issuers from across the world. Particularly encouraging is not just the return of private equity funds to the market, but also that we have seen more capital raisings – primary and secondary – by innovative funds focusing on investing in alternative finance and fintech, such as peer-to-peer lending.

“This shows the market’s capacity to support growth through permanent capital in vehicles to finance a diverse range of investment strategies, notably including small and medium enterprises and crowdfunding.”

Meanwhile, a customer survey by Barclays Stockbrokers that gathered retail insight into IPOs, has shown investors are likely to hold an investment in a future IPO for more than one year, with more than 70 per cent of the firm’s clients and non-clients expected to hold an IPO investment for at least one to five years, if not longer.