Liontrust ESG Trust IPO cancelled

Firm not proceeding with launch as fund raising fails to meet £100m target

Liontrust has announced it will not be proceeding with the launch of its ESG investment trust after failing to meet its minimum £100m target.

In a statement, the group said there had been “significant support” from nearly 2,000 individual private investors but overall demand was lacking and therefore the group would not be going ahead with the trust IPO, which had been scheduled for 5 July.

In May, Liontrust said it would be launching its first ever closed-ended mandate to allow the sustainable investment team to access smaller, less liquid companies than is currently accessible on the open-ended fund range, and also offer investors exposure to the team in a trust structure.

The sustainable team, headed up by Peter Michaelis (pictured), already run a £10.2bn open-ended range, which has grown from £2.5bn in April 2017.

Michaelis told ESG Clarity in June: “We don’t launch new products lightly – our last was in 2014 – but there is clear demand for ESG products. We have been running the open-ended funds over 20 years so the growth to £10bn hasn’t happened overnight, although it has been strong over the past five years.

“While there is this clear demand, there isn’t much product in the closed-ended space, and we have a contingent of investors that like the investment trust structure for our sustainable future approach.”

The trust would have differed from the OEICs by holding a more concentrated portfolio of 25-30 stocks, compared with 40-50 in the open-ended Global Growth mandate, and allow exposure to smaller companies of around $1bn, which Michaelis described as “pure plays” and companies that have the “strongest sustainable characteristics”.

Another key differentiator of the trust was plans to reserve 10% of the management fee to fund research to identify and develop financial instruments covering those UN Sustainable Development Goals (SDGs) that are currently uninvestable.  

Commenting in today’s statement, Michaelis, said: “In marketing the ESG Trust (ESGT), we were encouraged by the positive reaction to the unconstrained and high conviction portfolio and the plan for us to fund research into developing financial instruments for currently hard to invest in UN SDGs.

“We will take the ideas we had developed for ESGT and continue to apply them to our open-ended funds for which there is strong demand.”

See also: – Liontrust’s Parker: Dealing with company controversies

CEO of Liontrust Jon Ions added: “The strength of interest from individual investors shows the potential there was of building ESGT over the next few years.

“Nearly 2,000 individual private investors demonstrated their confidence in the investment proposition, the long-term opportunities offered by ESGT and the track record of the Liontrust sustainable investment team. We are disappointed we won’t get the chance to repay their faith through an investment trust after everyone worked so hard to secure its launch.

“We received significant commitment from investors for ESGT post launch but not enough for the IPO. This reflects the challenging market conditions for fundraising for investment trusts.

“Therefore, we will continue to focus on building the open-ended funds run by the sustainable investment team.”

Investment company fund raising

Annabel Brodie-Smith, communications director at the Association of Investment Companies (AIC), and editorial panellist for ESG Clarity, highlighted investment company fund raising has hit record levels this year.

“In the first half of this year five investment companies have launched raising £1.2bn, the highest first-half total in four years. Two of these were in the renewable energy space. Last year saw the launch of eight new companies, including three in the renewable energy infrastructure sector and two with social impact objectives – raising £632m in total.”

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Natalie Kenway

Natalie is global head of ESG insight for ESG Clarity and has been an investment journalist for 16 years. She won Editor of the Year at the Aviva Investors Sustainability Media Awards 2021, and was Winner...