However, Simon Elliott, head of investment trust research at Wins says this is due more to tricky investment conditions than any drop off in the sector. “The IPO window is virtually closed right now but that is across all markets, not just investment trusts.”
So far this year £1.28bn has been raised across the close-ended sector, a fall from the £1.94bn raised by this time last year, Wins research shows. Elliott doesn’t expect that gap will narrow anytime soon and believes the new issuance market will only get quieter as the summer progresses or until greater stability is seen in the macro conditions.
Unlike open-ended funds, which can be seeded at launch, close ended funds need to be able to gather a reasonable amount direct before one can get off the ground, he points out.
The uncertain and volatile economic and market conditions has already caused some trusts and companies to put IPO and issuances on hold. Among the high profile launches that have been postponed in recent months are: Aberdeen Emerging Markets Smaller Companies, Schroder Opus Commodity and an Indian equity vehicle for Fidelity.
Despite economic conditions dampening the new issuance market, the strengthening popularity of investment trusts means there has been some good news for the sector. Income and specialist trusts have found demand and new issues in April were especially busy. NB Global Floating Rate Income raised more than £300m, while Henderson International Income Trust raised over £40m and Gervais Williams’ Diversified Income Trust hit £50m with its launch.
"Yield still has appeal so income ideas will still find favour, as will specialist vehicles which are well-suited to the close-ended market," Elliott says.
In addition, while IPOs have been delayed, not all trusts have been hampered from fund raising. Such is the improvement in the investment trust sector that one in five close-ended funds are now on a premium, he notes. This has led to several retail-oriented trusts, like Murray International, to undertake regular issuance of new shares. This in an attempt to keep their share prices from moving too far away from its NAV, which can happen if a premium gets too high.
Those trusts still on discounts have also benefited from the improved close-ended fund demand. Despite the tough market climate, instead of widening, in general discounts have been moving in as the year has progressed, Elliott adds.
