We’re now midway through the Autumn IPO push and we’ve already seen a few IPOs get away – Mark Mobius’ new fund managed to raise £100m even though emerging markets are having a tough time. A few fund issues have surprised on the upside. I was particularly interested to see that Trian Investor 1 has raised gross proceeds of £270.6m through the issue of 270.6m shares at 100p. According to Numis, “Trian’s investment strategy is to act as a “highly engaged” shareowner at the companies in which it invests. Trian Investor 1 expects to invest in only one company at a time, and aims to make a substantial minority investment in a high quality, but undervalued and underperforming company listed in the UK or US, where the Investment Manager believes it has developed a compelling set of operational and strategic initiatives that will help generate shareholder value. The company currently expects the target to be a mid-cap or large-cap entity operating in the consumer, industrial or ‘‘non-balance sheet’’ financial services sectors, where Trian has significant historical operating knowledge and expertise.” On the grapevine, I also hear that the new Terry Smith small to mid-cap vehicle Smithson is getting real traction. Expect a bumper fundraise.
We’ve also seen a slew of additional fundraising by existing funds, especially in the alternative income and infra space. My guess is that many fund managers think the next three months represent the last window for fundraising before equity volatility really starts to pick up.
Over the next few weeks, we’ll probably see the last few IPOs come forward. Here’s the late runners in the IPO race….commentary in the first two courtesy of Numis.
Gresham House Energy Storage is seeking to raise £200m to provide Energy Storage Systems, providing utility-scale energy storage systems to the National Grid. “The fund, Gresham House Energy Storage Fund, will invest in facilities in Great Britain which provide services supporting grid stability and delivering infrastructure that is required to assist in the increasing reliance on renewables. They note that the UK operated over 40GW of renewable energy (30% of total electricity generation) in Q1 2018 and this is set to grow to 50% by 2023. The fund expects to list on the Specialist Fund Segment of the LSE in early November and is targeting gross proceeds of up to £200m from both the IPO and the subsequent placing programme. It has a cornerstone investment of more than £30 million, from the management team and institutional investors. Target Returns: The fund is targeting NAV total returns of 8.0%+ pa. It intends to introduce leverage of up to 50% of net assets. Asset management and revenue improvements combined with the gearing are expected to increase NAV total returns to 15.0% pa. The income is independent of renewables subsidies or the absolute level of power prices. The fund will seek to pay a dividend of 7.0p pa, with 4.5p in the first year. Portfolio: The seed portfolio comprises 70 MW across five fully operational sites. The fund will have exclusivity over an additional 132MW ready to build projects and a further pipeline project of 80MW is currently in an advanced stage of negotiation. The manager believes up to £200m can be deployed in a “tangible pipeline” within 12 months of IPO.
Management: The New Energy division of Gresham house will manage the fund. The team have worked together for over 10 years and have strong renewable and energy storage experience. To date, they have worked on 28 solar projects with a total capacity of 290MW and five energy storage projects with 70MW of capacity. Gresham House New Energy and Noriker Power have collaborated since 2016 to develop 70MW of operational energy storage system projects which will form the seed portfolio in the Fund. Noriker Power is 28% owned by Gresham House and is a specialist in the design of battery control systems. It provides the technical underpinning and oversight of operational ESS projects.”
My take? Watch this space! For reasons that will soon become obvious, I’ll be looking at this fundraising in much more detail next week. Also, see my column from yesterday on the looming carbon crunch.
Sirius Aircraft Leasing is targeting $250m at IPO for a Guernsey domiciled investment company listed on the premium segment of the London Stock Exchange. “The company will target a dividend yield of 8% pa (on the $1.00 issue price) once fully invested and an IRR of 10% pa, through investing in portfolios of attractively valued used single-aisle aircraft with leases in place to
globally diversified airlines. The fund is expected to have gearing of c.50% of total assets. Proceeds are expected to be deployed in six months.
The investment adviser is Sirius Aviation Capital Holdings (SACHL) which is led by Howard Millar, former deputy CEO of Ryanair Holdings. Howard spent 23 years at Ryanair and currently sits on its Board as a Non-Executive Director. Howard will be supported by a team with extensive industry experience and global contacts. Patrick O’Brien former Senior Tax Partner at KPMG Ireland will be joining SACHL as Non-Executive Director and Chairman of the Board. The adviser will receive a fee of 1.0% pa of net assets with a performance fee of 15% of returns in excess of 10% pa, subject to a high watermark. 5-% of the performance fee will be payable in shares.
The adviser highlights a steady supply of single-aisle used aircraft as traditional lessors dispose of older aircraft to maintain the average age profile of their fleets. In 2017, publicly quoted lessors sold in excess of 300 aircraft for an aggregate value of US$8bn. The demand is fuelled by cost savings on leasing used single-aisle aircraft compared to new, with International Airlines Group and Deutsche Lufthansa AG active operators of these older aircraft. The adviser notes that aircraft value are underpinned by engine values, given that aircraft manufacturers have a de facto monopoly on spare parts. “
My take? We’ve already got a slew of aircraft leasing funds courtesy of Doric Nimrod and Amadeo but this does look a bit different – namely there’ no obvious focus on big shiny new A380s and Dreamliners. There is a hole in the market for a more diversified player able to access to more ‘mainstream’ places. I haven’t got enough detail on the fund but this could be interesting for income investors. Again, watch this space.
Last but by no means least, we have the Global Sustainability Trust. These comments from the press release just issued by this innovative new fund.
“The objective of the GST will be to generate capital growth over the long term by investing in a diversified global portfolio, primarily consisting of private market investments, which aims to create positive measurable environmental and social impact. The portfolio is expected to be primarily invested in private market assets, including private equity, real estate, infrastructure, natural resources and private credit. Every investment will be subject to Aberdeen Standard Investments’ rigorous investment process which will assess both the likely risk return profile of the investment and its intended environmental and/or social impact. The GST and Aberdeen Standard Investments will report regularly to investors on the intended and actual impact of each investment measured against a framework agreed with the Board. This framework will take into account the 17 United Nations Sustainable Development Goals and underlying targets.”
The GST is planning to raise approximately £200 million through a placing, offer for subscription and intermediaries offer
Expected timetable. “The GST expects to begin formal marketing of the initial public offering (IPO) shortly. It is envisaged that the IPO prospectus will be published by the end of October 2018 (subject to the relevant regulatory approvals being obtained) and that admission of shares to trading on the London Stock Exchange will take place around the end of November 2018. Investors are able to register to receive a copy of the prospectus when it is available by visiting www.globalsustainabilitytrust.co.uk.”
My take? Seniors at Dickson Minto have been quietly working on this new fund for much of the summer. There’s certainly a growing demand for more sustainable investment solutions. The explosive growth of ESG ETFs tells us that there is a huge market for these kinds of funds and the LSE doesn’t really have too much choice at the moment. Menhaden Capital is probably the closest model in the It world – Impax Environmental and Jupiter Green are much sharper on the pure eco angle. Unfortunately, the Menhaden fund hasn’t been a great success and has fallen victim to the usual problem of stock picking idiosyncrasy i.e its bought some duff shares. But the growth of those ESG ETFs tells us that there’s a huge demand here and the vert active approach by this fund might be just what’s needed. Another case of watch this space!