It has been a busy start to the year for investment trust fundraising and one key theme has dominated.
The first three months of 2021 marked the busiest quarter for investment trust issuance in over a decade and the signs suggest fundraising will continue to be strong in the months ahead.
Tapping into ethical or sustainability themes and assets was a key driver behind the high levels of fundraising, and it's a trend that is expected to continue throughout 2021.
The investment trust analyst Numis notes: “Alternatives represented 66% of the total capital raised in the first quarter, and we expect them to remain popular. Investors continue to seek sources of uncorrelated yield, but we believe there is also greater interest in total return stories than there has been in recent years. Alternatives also offer pure routes to satisfy environmental, social and governance (ESG) investment criteria, particularly though renewable energy investment companies.”
In the latest sign of this trend playing out, earlier this week the Aquila Energy Efficiency Fund published its IPO prospectus. The investment company is seeking £150 million to invest in energy efficiency projects in the European Economic Area, the UK and Switzerland.
It will invest in energy efficient lighting, smart building and metering services, cogeneration plants, heating, ventilation and air conditioning systems, efficient boilers, solar photo voltaic plants batteries, other energy storage solutions, electric vehicles and associated charging infrastructure.
The target returns are between 7.5% and 9.5% a year, while a minimum 5 pence dividend for the year ended 31 December 2023 has been pledged.
Commenting on the proposed launch, Miriam Greenwood, chair of Aquila Energy Efficiency Trust PLC, said the company will “assist corporates in stepping forward to play their part in addressing the major challenges facing the planet from climate change, supporting important and ambitious national targets across the region to reduce CO2 emissions”.
The trust will have a fairly concentrated strategy, investing in between 25 and 35 companies. The portfolio will mostly invest in companies listed in developed markets.
- Want to invest ethically? ii’s ACE 40 list of ethical investments can help
- The ii Ethical Growth Portfolio: a ready-made diversified ethical portfolio, selected and managed by our experts
In addition, it is expected that there will be a rise in trusts tweaking their investment policies to adopt a greater focus on ESG factor.
At the end of last month, Dunedin Income Growth (LSE:DIG) announced its intention to introduce an enhanced ESG framework, which would result in the exclusion of certain companies, including tobacco manufacturers and those involved in controversial weapons and thermal coal extraction. The trust invests in UK equity income shares and has a current dividend yield of 4.1%.
The proposals will be put to shareholders on 10 June – a requirement ahead of a planned change in strategy. To make your vote count, sign up to receive shareholder materials and voting information directly from companies. The service allows interactive investor customers to vote electronically.
These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.
Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.