Cash-heavy M&G trust raises extra £25m

Oversubscribed placing a sharp contrast to November IPO


M&G Investments has raised an additional £25.3m for its cash-heavy alternative debt investment trust that disappointed at IPO just two months ago.

The oversubscribed issue was in sharp contrast to the £100m raised during the IPO, which was less than half its £250m target.

Market volatility in Q4 2018 provided a difficult backdrop for raising capital, said Tilney managing director Jason Hollands. Investors pulled £1.2bn from fixed income funds in November with the Sterling Strategic Bond sector suffering the most with £564m of redemptions, Investment Association flow figures revealed.

“I strongly suspect that the IPO process revealed latent interest in the strategy and product, but some potential investors would have signalled they were not ready to invest given the environment at the time,” Hollands said.

The M&G investment trust holds assets such as asset-backed securities, commercial mortgages, direct lending to small and mid-sized companies, infrastructure-related debt assets, leveraged loans to private equity owned companies, as well as public debt instruments issued by corporates or sovereign entities.

The capital raise comes despite the large levels of cash held by the trust disclosed in the last factsheet for the period to 31 December 2018. Net proceeds would be deployed in accordance with the investment policy, the filing said.

Cash-heavy trust

M&G Investments would not disclose the current cash levels of the closed-ended fund, stating that would be revealed in the January factsheet. However, cash accounted for 38% of the portfolio in the December factsheet, six weeks on from the IPO in the first half of November. Asset-backed securities were the largest sector allocation in December and 7% of the company was invested in the M&G European Loan Fund, which is focused on leveraged loans.

M&G co-head of alternative credit William Nicoll (pictured) has previously told Portfolio Adviser deploying large amounts of capital into private credit markets can be tricky.

When the placing was first announced on 18 January, the investment trust said the capital raise would not affect the time it would take for the company to be fully invested or its ability to meet its dividend target.

Winterfloods Investment Trust research analyst Kieran Drake said the plan at IPO was to initially invest in liquid credit and then gradually transition into a portfolio more focused on private credit as those opportunities came up. “M&G is obviously pretty big in the sector so it does see a lot of flow of those sorts of deals.”

In 2018 bonds/debt was the third-largest investment trust sector in terms of issuance raising £911m with M&G Credit Income one of two IPOs, according to Winterflood data. The Marble Point Loan Financing trust raised £30.6m at launch.

However, it was the second-lowest annual issuance over the last five years with £2.5bn raised in 2015 and £1.8bn in 2017.


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