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Only a ‘handful’ of managers to join race for unlisted assets in trusts

Biotech trusts top performance charts in February

Kathleen Gallagher, Investment Week, 12 April 2022:

Since 2018, ten trusts gained approval to expand unquoted exposure, with one more due to vote on a proposal shortly. All these trusts are run by just two asset managers, Baillie Gifford and Fidelity International, and experts think there will only be a “handful” of more firms likely to join their ranks due to the challenges private market investing poses.

Of the 11 trusts that changed or are looking to change their investment philosophy, four were asking to adopt unlisted exposure, with the remainder asking for an increase. Nine of the trusts are run by Baillie Gifford, with the remaining two run by Fidelity.

Following the Baillie Gifford changes, the firm now has just two trusts, the Japan Trust and Scottish American, which do not have a philosophy that explicitly allows unlisted exposure.

Investment Week understands that Baillie Gifford has no intention for those two trusts to invest in private assets. Fidelity, meanwhile, said that all of its companies are permitted to hold unlisted investments to varying degrees.

Alex Denny, head of investment trusts from the firm, also noted Fidelity Asian Values had recently purchased its first unlisted company.

While these two managers are keen to get involved in the race for unlisted assets, analysts explained that investing in the market requires a specific skill set and resources that not all firms have.

“Sourcing private equity deals is not a capability all investment managers have,” said Rob Morgan, analyst at Charles Stanley. He explained that investing in private companies is more hands on and requires different processes and risk management.

James Carthew, head of investment companies at QuotedData, added due diligence is higher and there are legal complexities that “can be off-putting”.

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