Statistics
UK Investment Trusts Shake Up Funding Lines Amid Market Turmoil - Data
UK investment trusts increasingly shook up their strategies to capture new economic trends or cope with the fallout from the credit crunch, according to figures on these closed-end funds from the Association of Investment Companies.
The sector has seen five investment companies announce changes to their investment policies this year, compared to six for the whole of 2008, while the market turmoil has encouraged funds to seek alternatives to bank debt as sources of fresh cash, the AIC said.
Last month, for example, Ecofin Water and Power Opportunities raised £80 million by issuing new convertible unsecured loan stock and raised £60 million through the issue of new zero dividend preference (zero) shares. In another case, Electra Private Equity announced that their new wholly owned subsidiary, Electra Private Equity Investments, raised £43 million through the issue of “zeros” shares. The AIC said that seven investment companies have raised new money by issuing new shares, with others pending.
A further eight investment companies have issued a bonus of subscription shares, with half of these being Asian-focused investment companies.
“The investment company sector has gathered real momentum over the course of 2009, and perhaps the most interesting development of the year to date has been the emergence of companies issuing zero dividend preference shares. It is also very interesting to see policy changes on the up, and in the past this has often coincided with an overall pick-up in activity in the sector,” said Annabel Brodie-Smith, communications director at AIC.
The investment trust sector has experienced a roller-coaster ride in the past ten years. At the end of the dotcom boom in 2000, a portion of the trust sector, known as split-caps because of their issuance of different share classes, suffered drastic falls in share prices due to the general market retreat, cross-shareholdings and heavy gearing. Investment trusts recovered in the middle of the decade but like other investments, were hit as the credit crunch took hold.