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New kids on the block struggle to attract investors’ cash

Biotech trusts top performance charts in February

Leader Article: New kids on the block struggle to attract investors’ cash

INVESTMENT WEEK 30 September 2019

The first three quarters of the year saw open-ended fund launches continue unabated, and this shows no signs of slowing down. In stark contrast, however, trust IPOs and the market appetite for new investment companies has waned through the first three quarters of 2019.

JPMorgan Global Core Real Assets (JARA) launched last week to great fanfare, raising around £150m and becoming the most popular trust IPO with clients of investment platform interactive investor since Fundsmith’s Smithson in October 2018.

In truth though, that is not that impressive. Only ten investment companies have floated in London since Smithson. In 2019, just six trusts have been launched raising less than £900m between them. That is a significant decrease from 2018, which saw 19 IPOs, raising £3bn, stats from the Association of Investment Companies (AIC) show.

Reasons for this are plentiful, as Annabel Brodie-Smith, communications director at the AIC, explained: “Investment company IPOs reflect market sentiment, and this year, with Brexit uncertainty and market anxieties such as the US-China trade wars and concerns about global growth coming to the fore, sentiment has been subdued.”

James Carthew, head of investment company research at Quoted Data, noted there has been a lack of cornerstone investors available, too.

In particular, Neil Woodford and Mark Barnett have been big backers of new funds in recent years, but have been either unable or reluctant to commit this year…

The AIC said the £4.8bn raised in H1 2019 was the highest ever level of secondary fundraising in a six-month period. “Investors clearly feel comfortable supporting existing companies with an established track record and dividend stream, where they know the manager and their strategy,” said Brodie-Smith.

Carthew added: “[Investors] have been putting money into established funds and I think that tells you it is more nervousness than anything else. They are reluctant to make a commitment to something new, but they will stick money into something they know and understand.”

Moving forward, brokers have plenty of irons in the fire, but whether they can successfully bring them to market likely depends on how markets fare through Q4 and 2020.

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