The suspension of Woodford Equity Income may have given the Richard Buxton-backed Merian Chrysalis trust a boost, as investors hunt elsewhere for unlisted exposure and access to small-cap expertise.
A RNS update on Tuesday confirmed the trust had attracted £175m through its latest share placement, smashing its initial £100m target.
This is the most money raised by the trust so far. It raised £50m earlier this year and £100m when it floated on the London Stock Exchange last November, half the amount it had been hoping to raise.
The latest placement takes the trust up to £400m.
The board said it was pleased with the “strong response” from investors which will enable managers Richard Watts (pictured) and Nick Williamson to deploy capital into an “exciting pipeline” of investment opportunities.
The other half of the proceeds will be used to acquire shares in a slew of unquoted holdings from the Merian UK Mid Cap and Merian UK Smaller Companies Focus which are run by Watts and Williamson respectively.
Benefiting from Woodford Equity Income suspension
Willis Owen head of personal investing Adrian Lowcock also thinks Merian Chrysalis may have benefited from the suspension of Woodford Equity Income.
“The closure of Neil Woodford’s fund and the pressure on the Woodford Patient Capital trust has put a spotlight on the unlisted market and may have led investors to look elsewhere for unlisted exposure and to small cap experts such as Merian,” said Lowcock.
Merian previously hinted the decision to transfer unquoted stocks from its open-ended funds to Merian Chrysalis was motivated by the fallout from the Woodford Equity Income fund suspension, stating that “recent events have resulted in a heightened level of interest regarding this type of investment in open-ended funds”.
Lowcock said the transfer makes sense as Merian’s UK team work closely together and share investment ideas.
“Whilst I don’t think Merian needed to be overly concerned about the unlisted and illiquid investments, as you’d expect a small and mid-team to have some exposure to illiquid and potentially unlisted stocks, I can appreciate their reasons for wishing to change where these investments are held and they now have the vehicle to hold the investment,” said Lowcock.
Shifting attitudes toward private assets
Chelsea Financial Services managing director Darius McDermott thinks Merian Chrysalis’s success this time around has to do with changing attitudes toward private stocks and the benefits of having a nearly year long track record.
McDermott has invested with the trust since IPO and chipped in toward the most recent placing.
He said at launch there was a “little scepticism” around this pre-IPO type equity, which the trust’s performance has helped shut down.
The trust is first quartile over three and six months, returning 3.8% and 8.4%, compared with the IT Growth Capital sector which has lost investors 8.2% and 13.6% over the same period.
“This is a greater acceptance of not only the asset class but Merian’s ability to run that asset class,” he said. “We’ve followed the story and it’s proved in its short life to have a fairly low correlation to the broader equity market.”
