Hydrogen-focused investment trust launches

This new trust is hoping to capitalise on what has become one of today’s hot sectors.

HydrogenOne Capital Growth (LSE:HGEN), the UK’s first closed-end trust investing in hydrocarbon stocks, has listed on the London Stock Exchange (LSE).

The trust aims to build a portfolio of both hydrogen and complementary hydrogen-focused assets.

According to the investment trust broker Numis: “Key characteristics of investments include a proven supply of manufacturing and product supply, plans to monetise the business in the short term and/or distinctive product offerings that can help establish a competitive position in the market.”

Stocks in the trust’s portfolio are expected to have a market cap of between $50 million to $500 million.

Unlisted companies are expected to initially comprise around 70% of the portfolio. However, the trust’s managers hope to reduce listed exposure to around 10% over time. The trust will primarily focus on developed markets, such as Europe, North America and the Asia-Pacific region.

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Hydrogen has become an increasingly popular investment theme, as investors grow more concerned about climate change. Hydrogen energy is a so-called clean fuel. Unlike oil and coal, when consumed it does not emit CO2. As a result, it is seen as an environmentally friendly fuel source. The managers of the trust say that it is for investors who want to move beyond net zero now, not later, and deploy substantial growth capital into the solutions underpinning the energy transition.

Thematic ETFs have been a popular way for investors to play the hydrogen theme. Earlier this year, the L&G Hydrogen Economy ETF USD Acc (LSE:HTWO) was launched. This ETFs tracks a basket of stocks deemed to be part of the wider “hydrogen economy” theme. There is also the VanEck Vectors Hydrogen Ecoy ETF A USD (LSE:HDRO).

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The investment trust raised a total of £107.4 million before listing, slightly more than the minimum required £100 million. That, however, fell way short of its £250 million target. Investment trust launches have faced a rough time lately, with several being shelved due to falling short of the requirement.

The trust is targeting net asset value total returns of 10 to 15% a year over the medium term.