Alternatives funds dominate investment trust launches

A search for yield has been one of the main drivers in the growth of the sector.

A search for yield has been one of the main drivers in the growth of the sector. 

In total 77 investments trusts, closed ended funds that are listed on the London Stock Exchange, have been launched in the last five years to the end of June. Of these, seven out 10 have been launched with a mandate to specialise in alternative assets.  All the top 20 fastest growing investment company launches are invested in alternative assets. 

Demand for income has clearly had a significant impact on the growth of these launches, with all but one of these 20 companies yielding 4 per cent or more. Interestingly, and clearly linked to the demand for yield, only four of these companies are currently on a discount.

Annabel Brodie-Smith, communications director at the Association of Investment Companies says the investment trust market's record level of assets under management -  reached at the end of May 2017 hitting almost £168bn futher illustrates the trend. 

"It’s significant that all the fastest growing launches over the last five years are in higher yielding alternative assets where there has been strong investor demand," he said.

“The closed-ended structure of investment companies is particularly suited to illiquid alternative assets. This has been emphasised by the problems suffered by the open-ended property funds after the Brexit vote.

“Investment companies are listed companies on the stock exchange so investors can always buy and sell shares freely. Investment company managers do not have to manage inflows and outflows and can take a long-term view of their portfolios, without being constrained by the illiquid nature of the asset class.”