Ben Goldsmith to head new efficient energy trust
Alternative investment fund manager Frostrow Capital announced its intention to launch Menhaden Capital on Friday.
The trust is the brainchild of Ben Goldsmith, founder of environmental asset manager WHEB, and will seek to invest in assets that 'deliver or benefit from the efficient use of energy and resources'.
The firm says the trust will be a multi-asset, absolute return vehicle that will invest in a small number of holdings - typically 20 to 25 positions - within three themed areas: 'yield assets', special situations and listed equity.
Menhaden's factsheet states that the companies it invests in could operate in sectors such as industrial processes and material efficiency, energy efficiency and storage, power generation or waste and water.
Alternatively it says companies may simply have 'recognised the need to adapt and change their business model or aspects of their business in response to resource challenges.'
Speaking to Money Observer, Goldsmith says: 'We’ve been working on this almost exclusively for a year now and I think that being able to match patient capital – which is what you get through a closed-ended investment structure – with an opportunistic investment style and being able to vary the mix of asset classes according to how you see the world is a really effective way of investing thematically. We’re trying to marry that patient attitude with an opportunistic investment style.'
Goldsmith has stepped back from WHEB in order to launch the trust as chief executive alongside investment manager Alexander Vavalidis, formerly of Manzanita Capital, and non-executive chairman Graham Thomas, former chair of Money Observer Rated Fund RIT Capital Partners' Chief Executive Committee.
The listed equity portion of the portfolio will be managed by the WHEB team under the leadership of WHEB's chief executive officer George Latham. Listed equities will account for around 40 per cent of Menhaden's total assets and will take the form of 15 holdings in global large and medium sized companies.
Within the high yield and special situations portions of the portfolio the trust will include renewable energy firms via investments in 'mature, commercially proven renewable energy technologies' in the former, and the 'development of proven renewable energy infrastructure' in the latter.
The launch comes at an inopportune time for renewable energy following chancellor George Osborne's announcement in Wednesday's budget that the Climate Change Levy (CCL) exemption for renewable energy firms will be scrapped from August 2015.
The news led a number of listed renewable energy infrastructure trusts to subsequently trade lower on Thursday and Friday. As a result all UK listed renewable infrastructure vehicles have seen their share price premiums to net asset value (NAV) fall below their 12-month average levels.
Most trust's have claimed that the reduction in UK corporation tax from 2017 should largely offset the removal of the exemption whiel many had expected the move in advance. However Goldsmith says that the move is a negative one for investor confidence in UK infrastructure:
'Firstly, how can you charge companies that don’t produce carbon dioxide emissions under a carbon dioxide emissions programme? How do you compute that? I don’t understand.
'Secondly, the perception is really bad. People have already gone and invested in a wind farm or a solar park etc. on the basis of a deal that’s been constructed and guaranteed by government then once the thing is up and running, the government decides to change the economics of that deal retroactively.
'It says that if you come to the UK and invest in a toll road or a hospital or a windfarm, there is a danger that the government will change its mind and change the deal that you did with them. So it’s a bad thing in terms of investor confidence in UK infrastructure,' says Goldsmith.
Menhaden is targeting up to £150 million during the initial offer period. Menhaden says that a number of 'prominent individuals' have already confirmed their intention to subscribe for shares, representing an aggregate value of approximately £80 million.
Investors can apply for ordinary shares in Menhaden from Friday 10 July for a minimum subscription amount of £1,000 then in multiples of £100. The offer is scheduled to close at 11am on 28 July with listing on the London Stock Exchange (LSE) expected on 31 July.
The firm says it will target a dividend yield of 2 per cent a year once the company's assets are 'substantially invested', which is expected to be at the end of the second full year (July 2017).
The trust will also be able to gear, or borrow, up to 20 per cent of its net asset value (NAV) for 'working capital and investment purposes'.
The annual management fee will be 1.25 per cent a year on the first £150 million of assets under management then 1 per cent thereafter. There will be a 10 per cent performance fee over a 'hard hurdle' of 5 per cent a year (compounding) that will be based on a three-year performance measurement period, but subject to a high water mark and capped at 1.5 per cent of net asset value.
Numis Securities is acting as sponsor, corporate broker and bookrunner for the launch. Investors can view the full prospectus here.