Follow The Money: Investment Trust New Issues

Today sees the launch of Tritax EuroBox (EBOX), which follows in the footsteps of the very popular Tritax Big Box (BBOX). Therefore, it seemed like an opportune time to review what new investment trusts have joined the stock market recently, to see what sectors are sizzling hot and what are definitely not.

There have been 29 investment trusts launched since the start of 2017 as far as I can tell. They are currently worth a collective £5bn, which represents about 3% of the total market value of all investment trusts of around £160bn. While that suggests that we are not seeing a flood of new investment trusts, there are three or four sectors that seem to be pretty popular right now.

Here’s one of my trademark ‘too long to fit on a single page’ tables:

New investment trusts

Investment trust	Sector	Launched	Mkt cap £m	Yield %	+Prem/ -disc
ScotGems	Global Smaller Companies	Jun-17	48	–	-7
Odyssean IT	UK Smaller Companies	May-18	92	–	7
Aberforth Split Level Income	UK Smaller Companies	Jul-17	189	4.0	-5
Downing Strategic Micro-cap	UK Smaller Companies	May-17	51	–	2
Baillie Gifford US Growth	North America	Mar-18	236	–	4
Jupiter Emerging & Frontier Income	Global Emerging Markets	May-17	98	5.5	2
Ashoka India	Country Specialist	Jul-18	48	–	5
JP Morgan Multi-Asset	Flexible Investment	Mar-18	88	4.2	-5
CIP Merchant Capital	Flexible Investment	Dec-17	49	–	-4
PRS REIT	Property Direct – UK	May-17	517	4.4	6
LXI REIT	Property Direct – UK	Feb-17	218	5.0	5
Tritax EuroBox	Property Direct – Europe	Jul-18	300	* 4.8	3
Aberdeen Standard Euro Logistics Income	Property Direct – Europe	Dec-17	194	* 5.5	4
Warehouse REIT	Property Specialist	Sep-17	167	6.0	0
Triple Point Social Housing REIT	Property Specialist	Aug-17	214	3.5	7
Supermarket Income REIT	Property Specialist	Aug-17	189	5.4	6
Residential Secure Income REIT	Property Specialist	Jul-17	170	2.7	-2
AEW UK Long Lease REIT	Property Specialist	Jun-17	73	3.4	0
Impact Healthcare REIT	Property Specialist	Mar-17	198	5.8	3
Marble Point Loan Financing	Debt	Feb-18	212	7.8	5
Fair Oaks Income 2014	Debt	Apr-17	46	8.4	9
BioPharma Credit	Debt	Mar-17	951	5.2	4
TOC Property Backed Lending	Debt	Jan-17	28	6.8	7
Gore Street Energy Storage	Renewable Energy	May-18	31	–	2
Greencoat Renewables	Renewable Energy	Jul-17	293	5.5	14
Life Settlements A	Insurance & Reinsurance	Mar-18	68	–	-27
Tufton Oceanic Assets	Leasing	Dec-17	96	–	3
Augmentum Fintech	Tech Media & Telecomm	Mar-18	96	–	3
EJF Investments	Financials	Apr-17	110	5.5	3

Source: AIC website, * denotes the target yield 

A couple of notes on the above. I’ve not looked at venture capital trusts for this, and have taken the dividend yield data at face value from the AIC website. I suspect this data point is based on historic payouts, so for the newest investment trusts there may not have been any payments yet and the yield may be shown as zero as a result.

Tritax EuroBox’s stated dividend aim is 4.75%, and Aberdeen Standard Euro Logistics Income is 5.5%, so I have used those in the table above, but I haven’t checked the other zero payers to see if they have declared similar dividend targets.

The hunt for yield

It’s not surprising to see some big yields in the table above. The average yield across all these new investment trusts is 3.4%, but if you strip out the non-dividend payers, the remaining 18 offer an average of 5.2%.

The two sectors that seem to be dominating are UK property and debt financing. The former is perhaps a little surprising, given the big discount to net assets that sector giants like British Land and Land Securities trade on at the moment, but we can see it’s the specialist property areas attracting the money, such as big box warehouses, social housing and supermarket properties, rather than generalist operators.

Also popular right now, sector-wise, are smaller companies and renewables, both of which have had pretty good runs recently.

What’s out of favour?

It’s noticeable that country specialists are thin on the ground, with Baillie Gifford US Growth and Asoka India being the exceptions. The latter listed last week but failed to reach even half of its fundraising target of £100m.

I remember that when I first started getting interested in investment trusts back in the 1990s, Asia Pacific funds were all the rage, and you couldn’t read an article in the press without someone recommending a fund covering that region. But the Far East is noticeable by its absence.

Finally, with the reasonable chance of a Labour government in office sometime soon, infrastructure investment trusts seem to be lying pretty low.

Buying what’s hot

I inclined to think that lists like this can act as a decent contrary indicator, as they can flag up areas to be wary of and for potential research.

That said, I might take a look at the Debt sector, as I’m not really familiar with the investment trusts within it, and I’m curious to see how they have fared.

And I suspect I will take a look at Life Settlements, just to see what has happened to cause that to sink to such a massive discount in just a few months. As well as the A shares, there are also B, D and E shares, so it looks like a complex situation that may well end up in my ‘too hard’ box.