It wasn’t just the weather that was hot in July 2018 – according to data from Winterflood it was also the strongest month for investment trust fundraising so far in 2018 with nearly £1bn raised across the sector.

More than half of this amount related to new investment trusts joining the stock market with the remainder coming from existing investment trusts raising more money.

The latter includes Greencoat Renewables (GRP) which raised €111m at a 4% premium to net asset value through an oversubscribed placing. The Renewables Infrastructure Group (TRIG) raised £64m in July and Foresight Solar Fund (FSFL) raised £48m, among others.

The three investment trust IPOs (initial public offerings) in July were European logistics play Tritax Eurobox (EBOX) which raised £300m, music intellectual property investor Hipgnosis Songs Fund (SONG) banking £202m and Ashoka India Equity (AIE) which attracted a more modest £46m to invest in a concentrated portfolio of Indian stocks.

In this article we will examine each of these new floats in more detail to help you get acquainted with the newest names in the investment trust space.

Tritax already runs the £2.2bn Tritax Big Box REIT (BBOX) which has been a big success story since its own launch nearly five years ago. Investing in big warehousing facilities in the UK, it has benefited from increased demand for this type of asset created by the ongoing shift to online shopping.

Web-based retailers need plenty of warehouse space from which to sort and distribute products. This opportunity is arguably less mature in continental Europe. According to a study by the Centre for Retail Research the average online share of total retail sales in European countries surveyed was 8.8% in 2017, around half the 17.8% share in the UK.

Unsurprisingly, given the previous success of the Big Box vehicle, there was strong demand for the Eurobox offer which was heavily oversubscribed. The money will be invested in a €1.8bn pipeline of logistics properties – with Tritax in active negotiations to purchase assets worth more than €0.6bn.

The trust will target an initial dividend yield of 4.75%, to be paid quarterly in sterling, and a total return in the medium-term of 9% a year. Operating in a similar space, Aberdeen Standard European Logistics Income (ASLI) raised £187.5m in an IPO last December.

We looked at this trust in more detail in the 5 July issue of Shares. The company is targeting returns by licensing a catalogue of songs from high profile artists.

Whenever a song from this catalogue is ‘made’ in physical or digital form, streamed or played on TV or radio the investment trust can book revenue as it will receive a royalty cheque.

The aim is to deliver 10% or more in total net asset value (NAV) returns a year with a 5% yield in time.

The trust will be advised by Hipgnosis Songs, which was founded by Merck Mercuriadis, former manager of well-known performers such as Beyoncé, Guns N’ Roses and Elton John.

Among the risks investors need to weigh is the current dominance of the music streaming space by Spotify. This leading position could allow it to exert downward pressure on royalties and undermine the returns Hipgnosis is able to achieve.

For now, the market seems excited about the story with its £200m IPO coming in oversubscribed – although it must be noted that the trust tried and failed many times last year to float with investors unhappy about its fee structure which has since been revised down – so has its dividend target which was previously 6.5%.

The launch of this trust during a period of emerging markets volatility was reflected in a fundraise of just £46m compared with a target of up to £200m.

The funds will be managed by Prashant Khemka, an alumni of investment banking giant Goldman Sachs.

Ashoka joins the existing trio of Indian investment trusts – Aberdeen New India (ANII), India Capital Growth (IGC) and JPMorgan India (JIII) – all of which trade at significant discounts to net asset value.

Khemka and his team will be based in Mumbai and will look to execute on an opportunity created by strong economic growth, an attractive demographic profile and rising domestic consumption. The plan is to run a concentrated portfolio, benefiting from the fact that many firms on the Indian stock market are under-researched.

The trust will have no annual management fee and will instead charge a performance fee if it grows net asset value faster than the MSCI India IMI index in sterling terms over the medium-term. (TS)

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