For a sector that has got used to quite substantial amounts of fundraising, 2022 has proved a lot trickier for funds and brokers, by James Carthew

Some of the stalwarts of the sector such as the infrastructure and renewable energy funds have ended up on discounts. Pantheon Infrastructure, for example, which had to turn away cash at its IPO, had to pull its planned C share after its shares went to a small discount (although as we explained when Harmony Energy launched its C share – these do work, even when the ordinary shares are on a discount to NAV, without diluting ordinary shareholders). The delay will be frustrating for the managers, but we see no reason why the discount shouldn’t close in time.

In the renewables sector, months of uncertainty about windfall taxes have put a dampener on investors’ enthusiasm. ThomasLloyd Energy Impact just managed to raise $35m, but it is very much a one-off – it is investing in Asia and is therefore unaffected by UK windfall taxes. It had also lined up interest from European investors ahead of the issue.

Two new funds?

IPOs have seemed impossible in this context, but we might be about to see two new funds join the market.

The first should be fairly straightforward and has the potential to grow. Long Term Assets hopes to list on the Specialist Funds Segment, we think it might be because its share register will be quite concentrated at launch, but if it is successful and able to grow, we would hope to see it move to the main market with the liquidity benefits that should bring.

However, at launch, 17% of it will be owned by the Truell Conservation Foundation, a UK registered charity founded by Edi Truell and the late Danny Truell, then CIO of Wellcome Trust. We don’t yet know who the other big investors are, but this will be revealed in time.

The fund will invest in private (unlisted) assets and it will also have a bias to assets that have a positive societal impact. In the story that we published when it announced its intention to float, we listed some of the planned initial investments. We also discussed it in this week’s show, which you can watch back here.

The recent meltdown in the gilts market, while sparked by the lamentable Truss/Kwarteng budget, was amplified by pension funds engaging in liability driven investing (LDI). Don’t worry, I’m not going to go into the ins and outs of that here.

Suffice to say that there are quite a few pension funds who are realising that it might be useful to have more exposure to liquid assets and, as we bore on about a lot, investment companies are the perfect vehicle to hold illiquid assets – the liquidity is always there (at the price of the discount), and you can gain access to otherwise exciting assets for the price of a single share – what’s not to like?

Small cap biotech

The other new issue is the small cap biotech fund that we told you about a few weeks ago. Conviction Life Sciences will seek to take advantage of the market’s current antipathy towards growth stocks and growth stocks with no immediate revenue in particular. The biotech sector has perked up a bit in recent months – as Biotech Growth’s recent interim results demonstrated – but there is a long way to go to.

Conviction Life Sciences is focusing on retail investors rather than the institutions that will likely dominate Long Term Assets’ share register. We hope to publish an IPO note shortly – so look out for that – and also look out for an interview with the manager.

Conviction Life Science’s prospectus is out, and as usual with these things, please make sure that you read the risk warnings before making an investment. Also, as usual, access to the IPO is restricted geographically, particularly when it comes to US investors (who really shouldn’t be reading this either!).
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