Demand for existing investment trusts hits record high in 2019

Nearly a quarter of the fundraising was derived from the renewable energy infrastructure sector.

Funds and Investment Trusts January 3, 2020 by Tom Bailey

Despite the political and economic uncertainty, both in the UK and abroad, investment trusts were high in demand in 2019, with secondary fundraising hitting a record high.

The amount of money raised by existing investment trusts issuing new shares reached £6.9 billion, beating the previous all-time high of £6.3 billion in 2017 and was way ahead of 2018, when £4.8 billion was raised.

Nearly a quarter of the fundraising (£1.6 billion) was derived from the renewable energy infrastructure sector. Other sectors that proved popular were infrastructure (£952 million), Property – UK commercial (£753 million) and Royalties (£424 million).

The biggest fundraisings were The Renewables Infrastructure Group (£530 million) and Greencoat UK Wind (£506m) in the Renewable Energy Infrastructure sector and Hipgnosis Songs Fund (£424 million) in the Royalties sector.

New issues, though, were notably lacking. In total, eight new investment trusts were launched, raising £1.37 billion. This was down on 2018, when 19 investment companies launched raising £3.01 billion.

Ian Sayers, chief executive of the Association of Investment Companies (AIC), notes: “It’s been a successful year for investment companies. Assets reached a record level and existing investment companies raised £6.9 billion in 2019, an all-time high, driven by particularly strong fundraising in the alternatives sectors.

“This record year for fundraising demonstrates the strong demand for alternative, income-generating assets, which are well suited to the investment company structure.”

Investment trusts also continued to cut their fees in 2019. In total, 41 trusts cut their fees. However, there were several different ways trusts went about lowering their charges, with some removing performance fees and others opting for tiered fees, where charges fall as assets increase in size.

Excluding Venture Capital Trusts (VCTs), two in five (39%) investment trusts now make use of tiered fees, double the number that did so five years ago. Those who introduced this fee structure in 2019 include F&C Investment Trust, JPMorgan US Smaller Companies, Atlantis Japan Growth and 3i Infrastructure.

Overall, investment trusts have enjoyed an unprecedented level of investor demand in recent years, with the sector’s assets jumping by £100 billion over the past six and a half years to pass the £200 billion milestone for the first time at the end of July.

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