Investment trust fundraising in Europe persists amid volatility
European investors’ demand for investment trusts has continued during the coronavirus pandemic and trading volumes have remained fairly consistent, according to the latest issue of The Cerulli Edge—European Monthly Product Trends.
Cerulli Associates, a global research and consultancy firm, notes that demand for income-yielding trusts has been especially strong. As companies have slashed dividends in recent months in response to the financial impact of Covid-19, open-end income-paying funds have been faced with a dearth of dividends to rely on. However, the structure of investment trusts is such that managers can hold some income in reserve in order to continue making payments or even increase dividends during periods when income is difficult to generate. Unlike many open-end funds, investment trusts can also use profits to pay out dividends.
Fabrizio Zumbo, associate director, European asset management research at Cerulli, says that UK equity income and global equity income trusts have been gaining attention among investors seeking alternative sources of income in the current market.
Although only one investment trust was launched during the first half of 2020, according to the Association of Investment Companies (AIC), innovation has continued, with a focus on corporate activity such as mergers, acquisitions, and changes to management contracts and strategies. AIC data shows that between January and June 2020, six investment trusts changed managers, continuing a trend that started in 2019.
Fundraising has continued this year, in spite of COVID-19 and related volatility. Figures from the AIC show that investment trusts have raised more than GBP3 billion (USD3.9 billion) so far in 2020. Of the five sectors that raised the most, four are income-generating alternative sectors, with the infrastructure and renewable energy infrastructure sectors raising GBP437.1 million and GBP376.1 million respectively from Jan. 1 to July 24. The AIC investment company sector that raised the most during the period, though, was property—UK commercial, which attracted GBP443.0 million from the start of the year to July 24.