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The alternative trusts allowing investors to capture new trends

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Investment trusts enjoy record year for fundraising as they back a new wave of innovation

November 11, 2021, Investors Chronicle, By Mary McDougall

Investment trust fundraising amounted to £11.4bn in the first 10 months of the year, a record for the ancient fund structure which is now financing a new wave of innovation.

Most striking is the rate at which secondary fundraisings have been taking place. Some 93 trusts raised a combined £9.3bn over the first 10 months of 2021 – the majority of which invest in some form of alternative or unlisted asset. 10 investment trust IPOs have successfully launched this year, with six more in the pipeline at the time of writing. But it hasn’t all been plain sailing – six investment trust flotations have been postponed or cancelled owing to lack of demand, and five have been liquidated or rolled into another trust.

Growth Capital

In 2019, the Association of Investment Companies (AIC) introduced a new investment trust sector called ‘Growth Capital’ to accommodate a surge in trusts investing in late-stage private companies that they look to own until flotation or beyond – known as ‘crossover investing’. The sector has seen rapid growth as investors look for a way to participate in the growth of companies that are coming to market later…

Infrastructure

Infrastructure investment trusts have boomed as the energy revolution has gathered momentum and the pandemic has exposed a critical need to invest in infrastructure…

Property

Real estate investment trusts have also had a bumper year, with European property trusts raising £556m and the UK commercial property, logistics and residential subsectors each raising over £400m between the start of the year and 20 October…

Equities

Fundraisings across equity trusts have been significantly more muted, although Smithson (SSON), the smaller companies trust of the Fundsmith stable, has raised over £420m. Impax Environmental Markets (IEM), Edinburgh Worldwide Investment Trust (EWI), Pacific Horizon Investment Trust (PHI) and Worldwide Healthcare Trust (WWH) have each raised over £100m, too.

Carthew says that the profit taking in growth sectors is making some equity trusts look attractive for long-term investors. He singles out Monks Investment Trust (MNKS), Baillie Gifford US Growth Trust (USA) and Montanaro European Smaller Companies Trust (MTE). These are trading on discounts but their 12-month average ratings are premiums, according to Winterflood.

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