Investment trusts have raised a hefty £1.28bn through secondary fundraising in October — an all-time record for the investment company industry.
According to data from the Association of Investment Companies, published yesterday (November 4), the £1.28bn raised was the highest level of secondary fundraising ever seen in a single calendar month, up from the previous high of £1.18bn raised in June this year.
This was after data from the AIC out yesterday found the number of new investment trusts brought to market in 2019 was down 73 per cent on last year.
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.
Companies in the infrastructure sector led the way, raising a combined £405m, followed by the renewable energy infrastructure and royalties sectors which raised £380m and £231m respectively.
Hipgnosis Songs Fund — a trust focused on music royalties — raised the highest amount in October with £231m, followed by Renewables Infrastructure Group (£228m) and 3i Infrastructure (£223m).
Investment companies raising £100m or above in October 2019:
Investment company | Amount raised (£m) | Sector |
Hipgnosis Songs Fund | 231 | Royalties |
Renewables Infrastructure Group | 227.55 | Renewable Energy Infrastructure |
3i Infrastructure | 222.75 | Infrastructure |
International Public Partnerships | 116.50 | Infrastructure |
Supermarket Income REIT | 100 | Property – UK Commercial |
SDCL Energy Efficiency Income | 100 | Renewable Energy Infrastructure |
Source: AIC
Ian Sayers, chief executive of the AIC, said: “This strong month for fundraising confirms that investors want what investment companies can provide.
“The closed-ended structure can offer exposure to a wide range of assets, including illiquid assets, without worries about redemptions leading to harmful short-term decisions.
“This makes it highly suitable for investment in infrastructure and renewable energy assets, for example, which formed a big part of this month’s record fundraising.”
Mr Sayers added it was “encouraging” to see investors put their faith in the investment company structure which gives boards and managers the “freedom to make decisions in shareholders’ best long-term interests” and “steer companies through turbulent markets”.
Dave Penny, director at Invest Southwest, thought the Woodford saga had inadvertently drawn attention to one of the potential drawbacks of open-ended funds which could have prompted investors to look elsewhere.
He added: “Clearly investors continue to search for enhanced returns. I would urge them to be careful of the less mainstream nature of these funds, the gearing risk and the consequent potential for greater volatility.
“We would consider these funds more niche than most and suitable if at all for experienced or institutional investors primarily.”
imogen.tew@ft.com
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