Fund buyers have welcomed Liontrust’s first steps into the closed-ended space with the launch of a sustainable investment trust, but think the sector needs to catch up with servicing the growing demand for ESG strategies.
It comes after a bumper year in which Liontrust’s assets increased by 92% to hit £30.9bn at the end of March.
Sustainable investments account for more than £10bn of Liontrust’s assets under management and “continues to generate strong sales”, according to chief executive John Ions (pictured).
As a result, Liontrust announced in is Q1 trading update on Wednesday the intention to launch a sustainable investment trust, its first closed-ended vehicle, in “late June” which will be managed by the sustainable investment team.
Popularity of sustainable trusts gathers speed
The popularity of sustainable investment trusts is gathering speed as Liontrust’s announcement follows the launch of three sustainable investment trust this year alone. The Cordiant Digital Infrastructure Trust, the VH Global Sustainable Energy Opportunities Trust and the Digital 9 Infrastructure Trust all launched in 2021, while Schroders launched the British Opportunities Trust and the BS C Social Impact Trust in December last year.
Association of Investment Companies communications director Annabel Brodie-Smith said: “2021 is off to a strong start for investment company launches with three investment companies raising a chunky £880m.”
Brodie-Smith added that market sentiment is crucial for new launches, noting that there was only one launch in 2020 until the third and fourth quarters when appetite really picked up with a further seven launches, raising just over a £1bn in total.
She said: “There is a clear industry trend of ESG and sustainable investment company launches and the closed-ended investment company structure is particularly suited to these assets.”
Trust structure sensible for a long-term outlook
AJ Bell head of active portfolios Ryan Hughes welcomed the launch, saying that the investment trust structure is attractive, giving the fund manager “much more certainty over the level of assets without the worry of having to manage the daily inflows and outflows”.
He added: “Given the long-term approach taken by Liontrust and the fact that some money that has recently come into ESG funds may be short-term profit seeking rather than long-term investment, focusing on the trust structure seems sensible.”
However, Hughes warned that “getting trusts off the ground with critical mass is a difficult task” as Tellworth found out last year when it was forced to pull the launch of a trust focusing on UK smaller companies.
Trusts have been behind the curve on ESG
Tilney managing director Jason Hollands said the Sustainable Futures team at Liontrust has a strong pedigree but the asset manager does not currently manage any investment trusts and so this new departure for them.
He added: “While there are a number of investment companies focused on specific niches, such as renewable energy infrastructure, the investment trust sector has been relatively behind the curve in servicing the growing demand for ESG strategies.
“There are some notable exceptions such as Impax Environmental Markets, Jupiter Green and Keystone Positive Change, but there is certainly room for a new entrant and so I think the launch should be well received.”
Liontrust sees £1bn net inflows during Q1
In the first quarter of 2021, Liontrust saw net inflows of £1bn driven by inflows of £955m into UK Retail.
Ions said that its “robust investment and working processes have enabled Liontrust to deliver strong long-term performance, first-class service and reliable administration”.
The acquisition of Architas, completed on 30 October last year, added £5.6bn to its Multi-Asset sector.
The Q1 trading update also revealed the appointment of Quintin Price as a non-executive director with effect from 1 July, succeeding Mike Bishop.
Price joins from Actis where he is a senior adviser and is also a non-executive director of Aperture Investors and the F&C Investment Trust. He previously spent 10 years at Blackrock where he was head of alpha strategies and a member of the global executive committee.
Liontrust non-executive chairman Alastair Barbour said Price had a “wealth of experience, knowledge and insights” that will be an “invaluable addition to Liontrust”.
