Investment Trusts  

Blue Whale's Yiu cautious on trust launch

Blue Whale's Yiu cautious on trust launch

The chief investment officer at Blue Whale Capital, and lead manager of the Blue Whale Growth Fund, has played down expectations over the imminent launch of an investment trust.

Stephen Yiu told FTAdviser that although the firm was planning to launch a growth trust, he had no  plans to do so this year due to caution over whether an IPO would be successful.

Blue Whale Capital is backed by Hargreaves Lansdown founder Peter Hargreaves, who is the company's chairman.

A number of high profile investment trust launches have failed over the past 12 months due to lack of demand.

Earlier this month Liontrust pulled the IPO for its sustainable investment trust as it did not reach the minimum investment commitment of £100m.

In October last year, Sanford Deland Asset Management cancelled plans for a UK Buffetology Smaller Companies trust after also failing to attract the required level of funding.

In the same month, the Tellworth British Recovery and Growth trust shelved plans to float due to a lack in demand.

Part of the problem trust launches have faced is that a certain amount has to be raised on the day of the IPO. So while wealth managers and advisers can all express interest in a new trust, many won’t want to take the risk of committing capital without knowing who else has agreed to invest.

Yiu explained: “Raising money is [a] difficult exercise and with investment trusts you have to raise it in a single day...you [also] need to raise a lot of money on day one and if you fail to do that it would cause reputational damage.”

He added he was not sure Blue Whale had a big enough name to gather sufficient funds during an IPO yet.

In a monthly update this month, Yiu explained he wanted to launch a trust to invest in smaller companies which were "flying under the radar of most large funds". 

He said: "Some of these offer very compelling growth characteristics and have high quality management teams but due to their smaller size, can never be a substantial holding in a large open-ended fund.

"A Blue Whale Growth Trust would afford us the opportunity to apply our proprietary research and valuation discipline to smaller, more nimble companies globally."

He added that when the firm is ready to launch the trust, it would target a minimum £100m, realistically hoping to raise £250m to take full advantage of the opportunities in smaller global companies.

Speaking to FTAdviser, he added there were a range of other reasons for launching a trust and not another open-ended fund, many of them for the retail investor.

“[Investment trusts are] a lot more transparent [for investors], the problem with open ended funds is that you do get the daily price but as an investor you only get the price once a day. Before you buy it you don’t actually know the price.”