Investment Trusts  

Number of new trusts dwindles

Number of new trusts dwindles

The number of investment trusts brought to market in 2019 is down 73 per cent on last year, according to data from the Association of Investment Companies.

The data showed a mere six investment trusts have launched initial public offerings so far this year, compared with 23 in 2018 and 18 in 2017.

IPOs are when investment trusts first launch to market. The company is floated on the stock exchange and investors are able to invest in the trust for the first time.

 

As investment trusts are closed-ended products, once the initial fundraising is complete the only way to invest in the trust is to buy shares on the secondary market - from someone who owns them - as the trust will have a set amount of shares until it does a further fundraising round.

The drop in the number of trusts launched this year naturally caused the amount of assets invested in new trusts to plummet when compared with the years before.

In 2017 £2.9bn was invested through IPOs while 2018 beat the £3bn mark by £13m. But 2019 has seen only £900m invested in new investment trusts to date.

The data also showed no particular sector dominated the trust launches in any of the past five years, with 2019 seeing its six trusts launched across five different sectors.

JP Morgan launched a flexible investment trust while Troy Asset Management focused on UK Equity Income.

Two trusts were launched in the renewable energy infrastructure sector while the loans and bonds and private equity sectors also saw launches.

Tom Sparke, investment manager at GDIM, said the lack of launches likely stemmed from the high degree of uncertainty in the political sphere.

He added: “It may also be the case that the Woodford headlines are putting companies off launching while their potential investor base may be less willing to trust a new vehicle.”

Jason Hollands, director of communications at Tilney, agreed uncertainty was fuelling the decline, adding that areas such as property and infrastructure had been meaningful components of investment companies in recent years but such asset classes were more exposed to UK political uncertainties. 

The Association of Investment Companies’ communications director, Annabel Brodie-Smith, backed this notion and said investment company IPOs reflected market sentiment.

She said: “Whether and when IPOs pick up will depend on how markets perform and the outcome of the political and economic headwinds.”

According to Ms Brodie-Smith, existing investment companies have raised a record amount of £6.4bn so far this year. 

She added: “Investors clearly feel comfortable supporting existing companies with an established track record and dividend stream, where they know the manager and their strategy.”

Meanwhile Laura Suter, analyst at AJ Bell, said investment trust launches weren’t “totally dead”.