Of the nine IPOs so far in 2014, which collectively have raised £1.9bn, two fall within the infrastructure and renewable energy sector, two into the specialist debt sector, one within commodities and natural resources and two within the direct property space.
The largest of these new issues (and the biggest investment company IPO in nine years) came in February, the Kennedy Wilson Europe Real Estate (Property Direct: Europe) raised £910m.
This compares favourably with 2013’s listings, which saw a total of 14 IPOs, of which 11 fell into various specialist sectors. By comparison, 2012 saw only seven IPOs (of which four were in specialist sectors) that raised a relatively meagre £847m, while in 2011, the figure was only six, of which half were specialist listings.
According to the AIC, the reason IPOs have tended to be in specialist sectors is that the illiquidity of these sectors lends itself well to the closed-end structure of trusts as there is no need to sell assets to meet redemptions.
But, it adds: “One key, unifying theme has been income: the new launches we have seen have tended to be in higher yielding sectors, with five of this year’s IPOs offering target yields of 6% or above (source: Winterflood Investment Trusts).
Ian Sayers, AIC director general said: “The investment company sector is currently going from strength to strength, with a strong IPO market, historically low discounts and industry assets at an all-time high. Clearly good long-term performance, demand for income and RDR have all contributed to increased demand for investment companies.”
The other major trend noticed during the first half of 2014 was the continued reduction in fees being seen across the sector.
According to the association: “Some seven investment companies have removed their performance fee arrangements since the beginning of the year (since 1 January 2013, 19 companies have removed their performance fees). Over the year to date, over 20 investment companies have reduced their ongoing charges more generally.”