There has been a scramble recently to launch initial public offerings (IPOs) of new funds before the winter sets in, when markets could lose some momentum. The competition is especially intense in the world of real assets: funds backed by property, forests or infrastructure. The new funds tick multiple boxes. They are suitable for investors keen on environmental, social and governance (ESG) and sustainability, while they also allow you to earn income and diversify your portfolio.
Seeing the wood for the trees
Forestry specialist Foresight, which manages £7bn in assets, hopes to raise up to £200m for its Foresight Sustainable Forestry Company (LSE: FSF). It is targeting a yearly net-asset-value (NAV) return of consumer-price inflation (CPI) plus 5% on a rolling five-year basis. If CPI rates stay where they are (3.1%) that would imply a yearly return of 8%. Its forests, most of which are in Scotland, are worth £138m.
Foresight has been managing forestry assets for some time, largely through its inheritance tax (IHT) fund. That private vehicle will own just under 30% of the listed trust. Investors will not benefit from any tax advantages available through specific IHT schemes, but there are other upsides. The fund is hopeful it can generate extra income through demand for carbon credits (generated by planting new trees), which the manager forecasts is set to rise 100-fold by 2050. The offer closes on 18 November, and dealing will commence on 24 November. It will be available on most retail-investor platforms.
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New solar-rooftops infrastructure fund Atrato Onsite Energy (LSE: ROOF), looking to raise £150m, is another attractive option. It offers a dividend payout of 5p (on the 100p issue price) for the first and second financial year; the payout is to increase progressively thereafter. The annual total return target is 8% to 10% in the first financial year after listing and over the medium term. The hope is that commercial buildings’ roofs will increasingly be plastered with solar panels that generate a steady income; the strategy is to invest in the photovoltaic-generation systems and then sell the power via long-term, indexed power purchase agreements to the occupiers of the buildings on which the assets are installed. Atrato says it has identified potential acquisition opportunities worth £300m. It looks set to close its offer – also available on most retail platforms – by the end of November.
Private investors won’t be able to buy shares in Alinda Capital Infrastructure, which is seeking to raise up to £350m, as it is initially listing on the market’s specialist-funds segment, which is only open to institutional investors. But they can do so post-IPO via the secondary market on most retail platforms. Alinda Capital invests in firms that make money from infrastructure relating to transport and logistics, utilities and digital networks. It is targeting a yearly NAV return of between 10% to 12% over the medium term, with an initial dividend of 3.5p per share in its first full financial year, rising to 5p in the second financial year. The manager has an excellent record.
A promising Reit
Consider also Life Science Reit, a real-estate investment trust. It plans to list on Aim and raise £300m to invest in laboratories, offices and co-working spaces, manufacturing and testing facilities, and data centres. It will then rent these out. Life-sciences research is a burgeoning sector. The fund will exclusively focus on the “golden triangle”, which comprises research-intensive universities in Cambridge, Oxford and London.
The fund targets income-producing assets with a yearly NAV total return above 10% and an initial yearly dividend yield of 4%, set to grow to 5% in the early years. It’s expected to launch in mid to late November.
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