Investor demand for the infrastructure investment trusts appears to have returned to the sector as the Sequoia Economic Infrastructure Income fund easily surpasses its £200m fundraising target, instead taking in £253m.
The successful initial offer was “very significantly oversubscribed” and exceeded the maximum issue size, the board said in a regulatory filing published on Wednesday.
The £253m raised will be reassuring for other investment trusts in the infrastructure sector currently trying to raise cash. The sector was hit in Q1 with the collapse in Carillion and Labour Party rhetoric surrounding the nationalisation of UK infrastructure assets.
The £1.4bn sale of John Laing Infrastructure means investors in the sector will have fresh cash to redeploy.
The Sequoia fundraise will take total assets raised in the infrastructure sector over £1bn with total assets raised in the year to September being £781m, according to Winterflood Investment Trusts. In contrast, the sector raised £2.4bn in 2017.
Sequoia eyes £300m pipeline
Sequoia’s equity issue will take the investment trust’s invested assets to over £1.2bn and will be used for a £300m pipeline of infrastructure debt opportunities, predominantly in the US. Dealings in the new ordinary shares will commence on 12 October.
Chelsea Financial Services, which holds Sequoia Economic Infrastructure Income via in its managing portfolio range, participated in the share subscription for existing shareholders.
“There’s a huge need for infrastructure at the moment, not just in the UK,” said managing director Darius McDermott.
“Look at the terrible incident in Genoa when the bridge collapsed. There’s a lot of infrastructure that was built after the Second World War and some of this infrastructure needs renewing. This is a global phenomenon.”
Infrastructure provides yield, is often floating rate and is quite a defensive asset class, McDermott said.
INPP jumps on the infrastructure fundraising bandwagon
This morning, International Public Partnerships (INPP) announced its was targeting £75m in an equity issue, while several other infrastructure investment trusts are also in the midst of raising cash. John Laing Environmental is seeking £50m and BBGI is eyeing £67m.
The INPP board said the timing of the equity issue was due to “wider market considerations” – a possible reference to the John Laing Infrastructure sale.
Winterflood Investment Trusts research analyst Kieran Drake said investors have been more sanguine about infrastructure in the latter part of the year.
“The acquisition of John Laing has underlined that there are still investors out there who are still interested in the PFI space and are prepared to offer above the NAV in the case of John Laing.”
Gresham House are also targeting £200m for a renewable energy storage investment trust initial public offering (IPO).
John Laing cash freed up
The John Laing Infrastructure fund ceased trading on 1 October following acquisition and will make final payments to shareholders by 12 October. Dalmore Capital and Equitix Investment Management made the bid in July, which shareholders approved in late September.
The infrastructure investment trusts currently raising cash are not exactly like John Laing Infrastructure but have similar attractions in terms of yield and low correlation to equity markets, said Drake.
“A lot of the shareholders were in favour of accepting the cash offer. It’s difficult to determine what proportion will be looking to reinvest within the infrastructure sector and what proportion will be looking elsewhere,” he said.
