William John Market Report 08-10-21
William John Market Report 08-10-21Category: Reports
As countries around the world perpetuate their transition to a “net zero” economy in the coming decades, investor sentiment has been drawn towards investing in “green” financial products. Green bonds, a fixed income debt security that is specifically offered to finance environmental or climate projects, are the most issued green security but recently green investment funds have come into the headlines.
Green investment funds, structured as mutual funds or other related investment vehicles, only endorse investments in climate conscious companies and entities, and have been the subject of strong demand given the increasing international awareness surrounding environmental issues and government mandates supporting “net-zero” economies and its related infrastructure.
According to the Association of Investment Companies (AIC), UK specific investment trusts have raised a record amount of funds so far this year – known as secondary fundraising for existing investment companies. It tops the 2019 record of £7.4 billion and currently stands at £8.7 billion. Breaking down the funds raised by sector:
Source: William John Analytics, Association of Investment Companies
Clearly, investor demand for renewable energy green funds leads the way, having raised over £1.5 billion already this year. However, there was also strong demand for property (UK and European based) as well as growth equity.
The Schiehallion Fund, owned and operated by Baillie Gifford, has raised the most money out of all UK investment trusts so far this year, with over £500 million in funds raised. The investment mandate of the fund is to invest in later-stage private companies that are either preparing to go public or looking to commit capital to considerable business growth or expansion into new markets. Rounding out the Top 10 funds were the following:
Notably, the Renewables Infrastructure Group, which has invested in over 80 schemes including wind farms, solar arrays, and battery facilities, attracted the third most funds raised.
Investment Trusts are effective at delivering exposure to long term, illiquid assets for investors. Because of the way they are structured, investors can enter and exit their positions in the fund on the stock market whilst the fund itself can hold on to its assets for the long term. This contrasts with a mutual fund which normally has to adjust its NAV (Net Asset Value) when people buy or sell units of the fund – making it difficult to sustain long term investments in long term projects, such as renewable energy and its infrastructure.
With strong investor demand for long term assets, including property and renewable energy infrastructure, investors are clearly backing the UK economy in the long run. It will provide a welcome boost to UK markets that have rebounded robustly in a post-pandemic world and should accelerate the process of having a net zero economy in the near future.
Any opinions expressed in these documents are those of William John and are provided for information only. E&OE.