The crisis threw up new opportunities in the debt sector and some funds were launched to take advantage of the attractive market conditions.
Funds such as Carador income Fund, which launched in 2008, presaged a huge expansion of the debt sector with whole new sub-sectors including bank capital funds and, more recently, online or peer-to-peer lending funds.
2010 saw the launch of Fidelity China Special Situations which broke records for the size of a new issue in the sector. The more recent launch of Woodford Patient Capital exceeded that by some margin however. Both issues underscore the appeal of “star managers” to retail clients in particular.
Demand for income created whole new sub-sectors – equity income funds investing in UK small caps, both south and north America, emerging markets and more recently Japan.
Others include aircraft leasing funds such as the Doric Nimrod vehicles, vessels from Nimrod Sea Assets (which came a cropper when the oil price collapsed) and more diversified leasing assets from SQN Asset Finance; reinsurance companies such as CatCo Reinsurance Opportunities; ground rents; health centres; student accommodation; and a substantial new class of renewable infrastructure funds such as NextEnergy Solar and The Renewables Infrastructure Fund.
Average discounts have been on a narrowing trend for much of the post-crisis period but have wobbled over the past year on worries about Chinese growth, the collapse of commodities sector, Brexit and, possibly now, the US election.
All the way through this period the big global generalists have sailed on, sometimes coming under further pressure to reform as has been the case with Alliance Trust, but sometimes managing to thrive and expand, as has been the case with Witan.
These funds, the UK equity income sector and the global / overseas income funds remain a solid core at the heart of the sector.
In these uncertain times it is inevitable that funds that try to achieve absolute (positive only) returns with low volatility will be popular.
We think this ought to lead to a renaissance for the hedge fund sector but many investors are opposed to this. The craving for income, especially income derived from assets uncorrelated to equity markets continues unabated.
At some point interest rates will start to rise though and then the cycle will turn again. The one thing we can be sure of is that, barring regulatory hurdles, the investment company market will continue to reinvent itself and thrive.
