Capital markets make the world go round
Joe Truelove, Director of Carey Group, explores how capital markets are once again playing a more important role in oiling the wheels of the global economy.
Capital markets are where corporates go to raise equity or debt finance. There is often a connection to Guernsey, a British Crown Dependency, which is home to a thriving capital markets industry that has three distinct sub sectors. First, the high profile listed investment funds sector, second and less well-known is Guernsey’s capability to support listed trading companies on a range of international markets and finally, Guernsey is home to the domestic Channel Islands Securities Exchange Authority (CISEA).
Listed investment funds
In the first quarter of 2014 three noteworthy Guernsey incorporated investment funds successfully launched on the Main Market of the London Stock Exchange (LSE): John Laing Environmental Asset Group, Twentyfour Select Monthly Income Fund and Alternative Invest Strategies. In addition, Nimrod Sea Assets listed on the Specialist Funds Market (SFM) of the LSE.
There is strong demand for income generating asset classes which means that discounts to net asset values on listed funds are at historic lows and many existing Guernsey incorporated listed funds are raising additional capital through secondary issues.
Guernsey funds are also listed on other exchanges around the world. Indeed many seek dual listings in order to access capital from different markets, for example, Boussard and Gavaudan Holding is dual listed on the NYSE Euronext Amsterdam Exchange and the Main Market of the LSE.
However the largest Guernsey incorporated listed company, Resolution Limited, a life insurance company with a market capitalisation of £4.2bn listed on the Main Market of the LSE, is not an investment fund.
Listed trading companies
Other prominent Guernsey incorporated listed trading companies include Indus Gas Limited, Sherborne Investors (Guernsey) B Limited and Stobart Group Limited.
At the end of March 2014 there were 124 Guernsey incorporated companies listed on AIM (40), the SFM (14) or the Main Market (70). Of those entities, 73 are described as equity investment instruments, most of which would be considered to be investment funds, while 17 entities are real estate investment and services companies, some of which may also be funds. Nine companies are classified as mining and eight are general financial companies.
Summit Germany Limited, a Guernsey incorporated trading company, was admitted to AIM on 26 February 2014 with a market capitalisation on admission of approximately GBP154 million. In 2013 three Guernsey incorporated trading companies had successful AIM IPOs: Africa Oilfield Logistics Limited, African Potash Limited and Central Rand Gold Limited.
AIM is once again growing in popularity and Guernsey is seen as an ideal route to market.
Channel Islands Securities Exchange Authority
The CISEA was formed in December last year following the reorganisation and renaming of the Channel Islands Stock Exchange which was established in 1998. There have been 109 listings on the exchange in the first quarter of 2014 which brings the total number to 2,357 listings.
As well as closed-ended investment fund listings, the CISEA can also be used for listing the shares of open-ended investment funds, unit trusts and limited partnership interests. CISEA also provides a cost effective alternative to AIM for listings of extractive industries (mining companies) and trading companies.
A number of LSE listed entities have subsidiaries with CISEA listings, while others use the CISEA for a dual listing alongside an LSE listing. In 2014 Carey Group has acted as CISEA listing sponsor with respect to a number of high profile entities including: NB Distressed Debt Investment Fund Limited, Resonance Wind Finance Limited and an entity called PAH Midco Limited which was associated with the flotation of Pets at Home by KKR on the Main Market of the LSE.
The IPO market is currently very buoyant, in particular for listed trading companies. Guernsey has extensive experience with a wide range of entities seeking to attract investment through international debt and equity capital markets utilising international stock exchanges.
About the author
Joe Truelove is Director at Carey Group, a European financial services provider, which is a licensed fund administrator in Guernsey, acts as company secretary to LSE Main market and AIM listed trading companies and is a leading CISEA listing sponsor. Joe is also a Member of the Executive Committee of the Guernsey Investment Fund Association (GIFA).
For more information:
Phone: +44 (0) 1481 737248
An original version of this article was published in Investment Europe, June 2014.
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