GCP trust raises £51.5m as investors eye bond alternatives

Comes as M&G plans £250m private credit investment trust launch

Will inflation remain absent?

The GCP Asset Backed investment trust has raised £51.5m for a pipeline of opportunities as investors eye alternatives to fixed rate bonds in a rising interest rate environment.

The £339.2m trust, which launched in October 2015 and currently trades on a 7.3% premium, was targeting £70m in the issue. David Conlon is the lead manager and Gravis Capital Management is the investment manager. The trust focuses on loans in UK infrastructure, property and asset finance.

Winterflood Investment Trust research analyst Emma Bird said the £51.5m figure was still a good result for the fund and would make it more attractive to investors as it becomes a larger vehicle.

Bird said the specialist debt sector has grown in recent years and a lot of investment trusts are trading at premiums. The Honeycomb investment trust trades at the largest premium at 11.5% yet still yields 7.1%. 

“There’s demand for income especially in the alternative credit sector. The closed-ended structure can make use of illiquid assets and provide income through reserves,” she said. The floating rate nature of assets targeted by investment trusts in the sector also appealed as investors sought less interest rate-sensitive vehicles, she added.

GCP Asset Backed has a dividend yield of 5.7%, according to the Association of Investment Companies.

M&G Investments this week announced its plans to raise £250m for  Credit Income Investment Trust, which will invest in private, alternative and illiquid assets. Tufton Oceanic Assets, a ship leasing investment trust, announced on Tuesday it is looking to raise $100m.

Dealings in the C Shares from the GCP Asset Backed share issue will commence on 2 October. The board said proceeds would be used for a pipeline of assets identified by Gravis. The estimated NAV per C Share at admission is 98p.

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