New investment trust opportunities from October IPOs
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It has been a busy period for new launches with some interesting investment trusts coming to the market in October. By far and away the largest was Smithson (LON: SSON), but there were several others that have gone under the radar including a couple with successful managers that deserve further consideration.
If there is one name that is synonymous with the Emerging Markets it has got to be Mark Mobius, who has spent more than 40 years working and travelling in the region, including a lengthy stint in charge of the £2bn Templeton Emerging Markets Investment Trust (LON: TEMIT). He has recently founded his own investment management company that launched the Mobius Investment Trust (LON: MMIT) in October.
Small and mid-cap companies in the Emerging and Frontier Markets
MMIT will invest in small and mid-cap companies in the Emerging and Frontier Markets with an absolute return focus. It will target stocks with resilient business models and the potential to improve the sustainability and ethical impact of their operations. The fund will be run by Mobius himself and another former manager of TEMIT, Carlos Hardenberg.
It has been a difficult period for the Emerging Markets, courtesy of the strong dollar and rising US interest rates, which could explain why the fund only raised £100m, rather than its £200m target, although the lower stock prices might have created the ideal conditions for the new fund. Mobius certainly seems to think so as he subscribed for 15% of the shares himself.
Joe Bauernfreund, who is best known for running the British Empire Trust (LON: BTEM), will also be responsible for managing the AVI Japan Opportunity Trust (LON: AJOT), which will invest in a concentrated portfolio of cash-rich and over-capitalised small-cap Japanese stocks. The new fund raised £80m in October, although it had been hoping for a figure of between £100m and £200m. It will typically have 20 to 30 holdings and intends to take an activist approach by encouraging management to unlock the value by improving corporate governance in this overlooked area of the markets.
Dividends of Libor +4% per annum
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Income investors might prefer the M&G Credit Income Investment Trust (LON: MGCI), which raised £100m – well below its £250m plus target – to invest in a diversified portfolio of commercial mortgages, leveraged loans, direct lending, public bonds, structured credit and infrastructure debt. The aim is to generate dividends of Libor +4% per annum.
A more unusual income-focused option is Gresham House Energy Storage (LON: GRID), which attracted £100m to provide utility-scale energy storage systems to the National Grid. It will use the net proceeds to acquire a seed portfolio of 70MW operational energy storage projects across 5 sites for £57.2m and has exclusive rights over an additional 132MW of ready-to-build projects with a further pipeline project of 80MW that is currently in an advanced stage of negotiation. Once fully invested it will target a dividend of 7% per annum.
With the honourable exception of Smithson, which raised a record breaking £822m in mid-October, the market weakness has made it difficult for the recent new issues to attract the intended level of capital. Those that made it over this initial hurdle are well worth looking at, especially the Mobius Investment Trust and AVI Japan Opportunity with their proven managers and interesting mandates.
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