Long Term Assets Limited (LTA) has issued an intention to float (ITF) this morning, in which it has announced plans for an initial public offering (IPO) on the Specialist Fund Segment of the main market of the London Stock Exchange. LTA says that it will then launch a 12-month placing programme, aimed in particular at UK pension funds and other long-term savers.
LTA aims to generate income and capital growth over the long term by investing in a diversified, global portfolio of assets, consisting primarily of infrastructure, sustainable resources, private equity, real estate private debt and other private market investments. It aspires to be a “best-in-class” private assets vehicle, targeting a low 0.55% per annum management fee; typically a 7 to 8% p.a. hurdle rate of return (depending on the asset class) before performance fees kick in; a significant degree of inflation protection by allocating to inflation-correlated assets; and an ultra-long-term investment horizon. It has been designed to be particularly attractive to pension funds, and can provide them with a vehicle into which to inject their illiquid assets in exchange for publicly traded shares, subject to applicable legal and regulatory requirements.
Green credentials – positive impact investing is fundamental to the investment process
LTA has a core focus on being compliant with and aligned to the Climate Group’s NetPositive operational principles, and Positive Impact investing is fundamental to LTA’s investment process, with initial assets expected to include:
- major renewable energy infrastructure investments (in the form of Atlantic SuperConnection);
- Swiss medical rehabilitation and hotel (Evolène Santé, Grand Hotel Kurhaus) and health destinations (Arolla),
- a leading UK fibre optic and telecoms installation, operation and maintenance firm (Telent);
- supply chain counterparty compliance (REG);
- sustainable forestry; and
- design and manufacture of cell and gene therapy viral vectors (ViroCell).
The portfolio of Positive Impact investments comprises disruptive companies, sustainable business models and high growth sectors that are central to the ‘new economy’. Disruptive Capital considers that downside resilience in the portfolio comes from Swiss real estate and the established market position of Telent.
LTA’s advisory team – led by Edmund Truell
LTA’s investment advisory team is led by Edmund “Edi” Truell of Disruptive Capital GP Limited, the portfolio manager. Edi is a long-term private assets investor with over 30 years’ experience. He has invested in and built up a significant number of successful companies, including Pension Insurance Corporation, Getty Images, Imagine (now Future plc), Wickes and Paragon Healthcare.
Initial portfolio drawn from manager’s family office private asset portfolio
The initial LTA portfolio is made up of a diversified range of assets, recently valued in the region of £160m, comprising a complete selection of the Disruptive Capital’s family office private asset portfolio. Disruptive Capital has undertaken to give Long Term Assets priority access to its pipeline of future investment opportunities.
Ambitions to grow
LTA says that it is anticipated that the fund will scale rapidly through an ongoing placement programme, targeting pension funds and other longer-term investors. Disruptive Capital anticipates considerable market demand from investors hitherto constrained from investing in a diversified portfolio of private asset classes opting for a tailored, liquid, long-term vehicle including many pension funds.
Potential to grow through in specie transfers
Long Term Assets has the additional flexibility to accept a wide range of private markets assets as in specie subscriptions, in exchange for its publicly traded shares or shares which can be converted into publicly traded shares. This may be attractive to pension funds looking for solutions to improve the liquidity of their assets, following the recent turmoil in the LDI and gilts markets. LTA sys that, to the extent that such assets do not meet LTA’s demanding investment and ESG criteria, they can be held via realisation C shares.
On the flip side, LTA will have discount control mechanisms, including the power to buy in shares if they are trading below the prevailing Net Asset Value.
A ‘majority-independent’ board
LTA says that its ‘majority independent’ board is chaired by Michelle McGregor-Smith, the former chief executive and chief investment officer of the £27bn British Airways Pension Scheme. [QD comment: it is surprising to see that LTA is not being established with a fully independent board. Having a board that is fully independent of the investment manager is considered best practice and to not have one is very much the exception. We think that a fully independent board is more in line with its best-in-class aspirations and hope that this will be addressed in due course.]
AIFM
It is proposed that MJ Hudson is appointed as the Alternative Investments Fund Manager for LTA. MJ Hudson has years of experience managing private asset vehicles. Prof. Oliver Gottschalg is joining Disruptive Capital’s Strategic Advisory Committee. LTA says that he is renowned for his work at PERACS, part of MJ Hudson, analysing private fund managers’ performance.
Comments from Michelle McGregor-Smith, chair of LTA’s board
“Across its strategies for post-Covid recovery, post-Brexit “levelling up” and Net Zero, vast investment sits at the heart of this Government’s vision for a British renaissance. Long Term Assets stands at the ready to help address the shortfall in capital required to realise Government’s ambition to pool billions into a new generation of world-leading British infrastructure and businesses.”