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Investment trust IPOs: time to buy?

Biotech trust Trump benefit may be shortlived

The Big Theme 

Investment trust IPOs: time to buy?

By Dave Baxter, Investors Chronicle

With equity markets riding high, investment trust launches are finally making an appearance this year. Home REIT (HOME), a trust that invests in accommodation for the homeless, raised £240m in October and Triple Point Energy Infrastructure Company (TEEC) amassed £100m.

Other trusts that have announced plans to float include Round Hill Royalty Music fund, a potential rival to music royalties specialist Hipgnosis Songs Fund (SONG), as well as Buffettology Smaller Companies Investment Trust and Schroder British Opportunities Trust. The only investment trust initial public offering (IPO) this year before October was Nippon Active Value Fund (NAVF)…

“They’re not competing with existing funds,” says James Carthew, head of investment company research at QuotedData.

Investors could also tap into a relatively new asset class via IPOs. Round Hill Royalty Music, for example, invests in music royalties, although there are differences between its planned portfolio and Hipgnosis Songs Fund’s holdings. If you prefer the look of Round Hill Royalty Music’s approach or wish to tap into a promising new asset class before this trust’s shares maybe trade at a premium to net asset value (NAV), it could be worth subscribing to its IPO. Hipgnosis Songs Fund has successfully raised more than £400m this yea, although earlier this year its shares had traded at a small discount to NAV.

Recent IPOs in popular sectors have rewarded early investors. For example, Mr Carthew notes that Octopus Renewables Infrastructure Trust (ORIT) only launched in late 2019, but has enjoyed notable demand – despite there being many other renewable energy infrastructure trusts. Its shares were trading at a 13.5 per cent premium to NAV as of 19 October, according to broker Winterflood.

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