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Investment trusts rediscover their roots with a 21st century twist

The listed fund vehicles are financing innovation in clean fuels, space and digital infrastructure

Mary McDougall, Financial Times, NOVEMBER 12 2021

Investment trusts seem to be coming full circle. For most of the 20th century, they gradually moved away from their origins as entrepreneurial schemes investing in specific targets, often in Britain’s colonies, to running generalist equity portfolios. Today, they are raising record sums to fund a new wave of innovation in a period of rapid technological change.

Recent trends show investment trusts returning to their specialist roots. Among the 11 trusts to be launched this year, HydrogenOne Capital Growth specialises in hydrocarbon stocks to help promote opportunities in clean fuel and Seraphim Space Investment Trust is designed to fund space entrepreneurship, while Cordiant Digital Infrastructure and Digital 9 Infrastructure are the first two investment trusts with dedicated exposure to the infrastructure of the digital economy.

The ability of investment trusts to access private assets has led to them raising more money in initial public offerings and secondary fund raisings this year than at any point in their 153-year history, according to data from the Association of Investment Companies, the industry body for trusts…

Going for growth

Even investment trusts that major in listed companies are increasingly turning to the private sector, making use of the flexibility of their closed-ended structure…

In recent years a handful of investment trusts have been set up specifically to invest in private companies and own them through flotation. Baillie Gifford’s Schiehallion Trust, which is listed on the Specialist Funds Segment of the London Stock Exchange but is available to private investors on several platforms, is the largest example…

Chrysalis Investments, set up in November 2018, has a similar aim of targeting later stage private companies with long-term potential, but has a UK bias and is listed on the London Stock Exchange’s main market…

“The portfolios tend to be fairly concentrated and that presents some risk,” says James Carthew, head of investment company research at research firm QuotedData. “If portfolio companies can’t IPO — because markets are weak, for example — they may need to seek additional private funding.”

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