Investment trust fundraising hits an all-time high

There were five investment trust IPOs in the first half of 2021, with alternative income in demand. 

It has been a busy first half of the year for investment trust fundraising, with a record £6.3 billion invested into existing companies and IPOs over that time period.  

Figures from the Association of Investment Companies (AIC) show the lion’s share was money entering existing investment trusts through secondary fundraising. A total of £5.1 billion was invested. 

In terms of sectors, renewable energy infrastructure raised the most money, at £883 million, followed by growth capital, which received £803 million. Investment trusts in the latter sector invest in unlisted companies.

Another sector that proved popular was infrastructure, which raised £475 million. Global smaller companies and flexible investment were also in demand, with £436 million and £327 million invested. 

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At an individual level, Schiehallion (LSE:MNTN), a trust managed by Baillie Gifford that seeks to find tomorrow’s potential ‘unicorns’ before IPO, raised the most in the secondary market at £503 million. However, this was driven by a ‘C-share’ issue that was only made available to institutional investors and wealth managers. Smithson (LSE:SSON) and Chrysalis Investments (LSE:CHRY) were second and third in terms of fundraising, adding £307 million and £300 million.

The remaining £1.2 billion of fundraising was through successful new trust launches. This was the highest amount raised for IPOs for a half-year period since 2017. Over the past six months, there have been five IPOs: Cordiant Digital Infrastructure (LSE:CORD), Digital 9 Infrastructure (LSE:DGI9), VH Global Sustainable Energy Opportunities, Taylor Maritime Investments and Aquila Energy Efficiency (LSE:AEET).

Ian Sayers, chief executive of the AIC,notes: “The record fundraising in the first half of this year shows investment companies bouncing back strongly from Covid-19 and giving investors what they want, from growth opportunities in smaller and unquoted companies to income-generating alternatives such as renewable energy assets and infrastructure.

“IPO activity also increased significantly in the first half of this year. The new launches demonstrate that income remains a top priority and investment companies are continuing to help investors gain access to emerging areas such as digital infrastructure and energy efficiency.”

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A recently proposed IPO that failed to get off the ground was Liontrust ESG. The trust, which planned to invest in a sustainable manner, cited a lack of investor demand.

The asset manager noted that the trust received “significant support” from investors, with nearly 2,000 investors subscribing. However, overall demand fell short of the minimum £100 million set out in the prospectus.

Time will tell whether Seraphim Space, which is intending to launch a space-themed investment trust called Seraphim Space Investment Trust, is successful in its attempt to IPO. It is seeking to raise up to £180 million.

In addition, HydrogenOne Capital Growth yesterday announced that it is targeting a raise of £250 million. If successful, it will be the first London-listed investment trust dedicated to clean hydrogen. It has identified 36 potential investments and will have an ESG policy embedded in its investment process.