Joe Truelove, Carey Group

The return of the listed investment company sector

2013 was the best year for IPOs of listed investment companies since 2007, in terms of both numbers of new funds launched and the amount raised, with 21 London listed investment company launches raising GBP3.5bn, writes Joe Truelove, Director of Carey Group.

Secondary issuance in the sector saw existing funds raise an additional GBP2.5bn. The market hasn’t quite reached the boom in launches of the period 2005 - 2007 which saw 215 fund launches in a three year period but this is a return to the typical number of listed fund launches of the era before the boom but with much higher values than those days. 

The theme with respect to investment strategy for 2013 continued on from 2012 with a focus on energy and income generation across a number of fund launches and this seems to have continued as we enter 2014. There are already two new investment companies which have announced their intention to list in 2014; Ingenious Clean Energy Income Fund and Next Energy Solar Fund, both of which are intending to invest in energy generation. 

In terms of domicile selection, Guernsey continues to be the listed investment company domicile of choice with more London listed entities than any other jurisdiction except the UK. In 2013 this trend was reinforced: of the 21 London listed investment company launches in 2013 twelve were incorporated in Guernsey, four in the UK, four in Jersey and one in the BVI. 

Guernsey is very familiar as a domicile with investors, fund managers and their advisors in the investment company sector but also saw a number of Initial Public Offerings (IPOs) of trading companies in 2013 such as: Africa Oilfield Logistics Limited, African Potash Limited and Central Rand Gold Limited (all AIM listed, Guernsey incorporated trading companies) while Sherborne Investors (Guernsey) B Limited was a Specialist Fund Market (SFM) listed, Guernsey incorporated company which hit the headlines when it began to build a stake in 3i. 

At Carey Group we are working on a number of IPOs of Guernsey incorporated trading companies at the moment and already act for PPHE Hotel Group Ltd. which is a Main market listed, Guernsey incorporated trading company. We have a large exposure to real estate investments and increasingly we are seeing a trend for property companies being formed as just that and not as property funds, this may be as a result of the introduction of a European Alternative Investment Fund Managers Directive and the imposition of additional regulatory burdens on entities constituted as alternative investment funds. 

A number of Main market listed entities have subsidiaries with Channel Islands Securities Exchange (CISE) listings, while others use CISE for a dual listing alongside an AIM or SFM listing. In 2013, Carey Group acted as CISE listing sponsor with respect to a number of very high profile entities including: Doric Nimrod Air 3, NB Distressed Debt Investment Fund Limited, Baring Vostok Investments Limited, Resonance Wind Finance Limited and InfraRed Capital Partners. 

The CISE had a challenging end to the year with a reorganisation and renaming in December but now the dust has settled we have already seen an increase in the number of new business enquiries for CISE listings in early 2014. Carey Group already acts for over 100 listings on CISE including debt listings, trading companies and investment companies. 

It certainly seems as though the listed investment companies sector is performing well. Interest rates are still at record lows and investors are demanding income from illiquid income generating assets and these fit best into a closed ended vehicle. A stock exchange listing, especially while discounts are at record low levels (around 3.4%), is an attractive option to investors because it provides liquidity. It seems as though the listed investment company sector is well placed as the UK economy returns to growth but what does the future hold in 2014? 

Joe Truelove, Director at Carey Group and Vice Chairman of the Guernsey Investment Fund Association, chaired a panel session to discuss the outlook for the funds industry at the London Stock Exchange’s Investment Fund Conference on Monday 17 March. For further information please follow this link: 
http://www.lseg.com/markets-products-and-services/our-markets/equities-markets/investment-fund-conference-2014 or alternatively call +44 (0) 1481 737248, email joe.truelove@careygroup.com or visit www.careygroup.com 

 


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