While 2020 has been a year like no other, it has been a strong one for investment companies. Industry assets hit an all-time high of £221.4bn at the end of November reflecting a healthy recovery from the pandemic lows and the average investment company has returned 10.2% in the year to date (between January 1st and December 11th).
Investment companies continued to implement fee changes to benefit shareholders this year with 32 making amendments such as lowering management fees, introducing tiered fees and removing performance fees.
Existing investment companies raised £5.7bn in 20203 (secondary fundraising). This is lower than in 2019 when £7.3bn was raised – an all-time record – but higher than the £4.8bn raised by existing investment companies in 2018.
Existing investment companies in the Renewable Energy Infrastructure sector (secondary fundraising) raised the most of any sector in 2020 with £1.3bn. The Renewable Energy Infrastructure sector also raised the most of any sector in 2019 (£1.8bn). In 2020, Renewable Energy Infrastructure was followed by Property – UK Commercial (£732m) and Global Smaller Companies (£512m).
The largest fundraisings by individual existing companies were completed by Hipgnosis Songs Fund (£426m) in the Royalties sector, Greencoat UK Wind in Renewable Energy Infrastructure (£400m) and Smithson (£349m) in Global Smaller Companies.
After a slow start, IPO activity picked up in the second half of the year with five new investment companies launching. This brings the total number of IPOs in 2020 to six, raising £855m.
What were the top investment trust IPOs of 2020?
- Home REIT – LON:HOMEH (£241m)
- Round Hill Music Royalty Fund LP – LON:RHM (£214m)
- Downing Renewables and Infrastructure (£123m)
- Nippon Active Value Fund Plc – LON:NAVF (£103m)
- Triple Point Energy Efficiency Infrastructure – LON:TEEC (£100m)
“Despite the disruption and uncertainty caused by COVID-19, 2020 has seen the continuation of long-running themes in the investment company industry: healthy asset growth, strong fundraising from existing companies and falling fees,” said Ian Sayers, Chief Executive of the Association of Investment Companies (AIC). “Investment companies in the Renewable Energy Infrastructure sector continue to be in high demand for their attractive yields and their ability to contribute to a greener future.”
UK commercial property investment trusts see inflows
The UK commercial property sector is amongst those that raised the most this year. With most of the major open-ended property funds suspended for the majority of 2020, it was also encouraging to see more investment in closed-ended property investment companies which are particularly suitable for illiquid assets like property.
Investment trust boards have proactively worked on behalf of shareholders in the challenging environment of 2020 by negotiating lower fees for shareholders and proposing management group changes and mergers. “An independent board is a crucial advantage of investment companies over other types of fund and it’s good to see them continuing to represent shareholders’ interests,” said Sayers.