Investment trust insider on US versus UK closed-end funds – James Carthew: Higher governance standards help UK beat US in closed-end funds
The flood of fresh money streaming into the investment companies sector is incredible. I was chatting to investors, directors and journalists at an event to mark the third anniversary of AVI Japan Opportunities (AJOT) launch last week. One snippet of information I picked up is that the London-listed investment companies market is now larger than the US one.
To be fair, I haven’t looked at US closed-end funds for a long while – back when I was running Advance UK Trust, we thought about targeting some of these, but their corporate governance was appalling and shareholders had far less influence over boards than is the case in the UK. We decided not to bother.
The Closed-End Fund Association, a US equivalent of the UK’s Association of Investment Companies (AIC), has data from Lipper which lists 632 funds with combined assets of $302.5bn. The number of ‘funds’ seems to be vastly overexaggerated as it includes each different share class as a separate fund.
Further confusing the issue, though, there are about 70 closed-end interval funds in the US with assets of about $45bn some of which is included within that $302.5bn figure. Interval funds are a strange hybrid between open and closed-end funds. They are closed-ended but aren’t listed. Instead, they hold 5% tender offers each month as a way of providing liquidity.
By contrast, the AIC quotes 389 London-listed funds with assets of £274bn ($367bn), which might suggest that London overtook the US some time ago. The AIC’s data includes £11.1bn of assets for 3i Group (III), which I classify as a fund manager rather than an investment company, but even excluding this, London is larger.
Lipper says that there have been nine conventional US closed-end funds launched this year and… read more here