London attracts fund IPOs
Initial public offerings of fund vehicles on the London Stock Exchange Group raised the most money in the first half of the year in a decade, a fifth for US asset managers.
The LSEG said 14 funds listed on the exchange in the first months of this year to raise a total £2.3bn ($4bn), a 6% increase on the same period last year and the most raised in the first half of the year for the last 10 years.
Tom Attenborough, head of large caps, primary markets, LSEG told Markets Media: “The funds being listed cover a wide range of asset classes such as real estate or alternative energy. The investor interest means that transactions can get done at small discount, or even at a premium, to the net asset value.”
Alongside a wide investor base, Attenborough said London has built a strong ecosystem for fund listings with banks and brokers beefing up their teams.
The largest fund and the second largest IPO by money raised on the LSEG this year is Woodford Patient Capital Trust, which initially aimed for £200m but raised £800 million in April.
The exchange’s Specialist Fund Market now contains 25 listings and 11 are run by US fund managers. Three of the US funds listed this year.
Attenborough said US firms recognise the depth of the investor base in London and want to diversify their sources of capital. In addition there are some structural advantages to listing in London versus complying with US regulations.
“The visible pipeline is good,” he added. “The majority of our fund listings will be UK-focussed but we expect more to come out of the US.”
Gabelli Funds completed the £100m offering of a closed-end fund, The Gabelli Value Plus+ Trust in February. The fund invests in US equities and is run by Gamco Investors. The New York-based activist asset manager said it is the firm’s first direct entry to the UK investment community.
Marc Gabelli, portfolio manager and son of Gamco founder Mario Gabelli, said in a statement: “The UK market is highly sophisticated. We are delighted to be entrusted with the opportunity to grow wealth for the U.K. investor via the strengths of an investment trust vehicle.”
The Ranger Direct Lending Fund raised £135m in May to invest in instruments originated or issued by different direct lending platforms. The company said in its prospectus that direct lending platforms are an increasing source of liquidity for small and medium sized enterprises and consumers as banks continue to retreat from lending as a result of new regulations.
In March VPC Specialty Lending Investments, owned by US-based Victory Park Capital, raised £200m to invest in opportunities in the alternative lending market. VPC said in the prospectus: “The online lending market continues to expand rapidly as both borrowers and investors recognize the advantages relative to the traditional bank lending model.”
Attenborough said peer-to-peer lending firms are one sector that is being watched by the exchange, alongside the wider technology sector. Many US venture capital and private equity firms are investing in financial technology firms in London.
“We need to make sure that US investors do not automatically just think of US listings,” Attenborough added. “It used to be that high growth and technology companies used to get higher valuations in the US but that has changed over the last year.”
He cited the example of Just Eat, the UK online takeaway service, which went public in London in April on the same day as GrubHub went public in US and the two firms had comparable valuations. Attenborough said US firms from other sectors such as biotechnology and intellectual property commercialisation are also coming to London and are attracted to Aim, the smaller companies market.
In the funds sector, in June Apax Global Alpha Limited became the first private equity fund to list in London since 2010 according to Darko Hajdukovic, head of research and product innovation, primary markets London Stock Exchange Group.
Attenborough said: “The Apax deal was interesting as investors do not just want cash shells and the fund included seed investors so they could see exactly what they were buying.”
In addition to the IPOs, two funds came to London to complement their existing European listings – Volta Finance Limited in Amsterdam and Fondul Proprietatea in Bucharest.
Feature image via Eefoto/Dollar Photo Club
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