Booming demand for green infrastructure investments has helped power a record run of fundraising for UK investment trusts, with managers breaking the previous annual record for capital raising in the first nine months of 2021. UK investment trusts have raised £8.7bn in secondary fundraising so far this year, according to the Association of Investment Companies (AIC), already surpassing the previous 12-month record of £7.4bn set in 2019. Trusts that invest in renewable energy infrastructure from wind farms to biogas and batteries pulled in the most cash, with more than £1.7bn raised, followed by other infrastructure-focused vehicles at £988m. Although fundraisings often tap institutional investors and wealth managers, there has also been a rise in direct retail participation as trusts throw open their offers to ordinary investors. The rapid pace of fundraising highlights the robust appetite for green-tinted investments, and how investment trusts have gained popularity as a vehicle to invest in alternative assets. Income-conscious investors are also lured by the attractive yields on offer in the sector, according to managers. Investment trusts, a category of UK investment vehicles that are structured as listed companies, have proved useful to investors looking to tap long-term assets such as infrastructure. The structure allows investors to enter or exit their positions in the trust via the stock market while the trust company holds the underlying assets for the longer-term. In contrast, mutual funds generally need to buy and sell underlying assets to facilitate investors’ moves in and out of the fund, a set-up that makes it more difficult to back years-long projects such as battery storage, renewable power generation or energy efficient infrastructure. With the increasing trend for companies to remain private for longer it is likely that there will be continued demand for these types of investment trusts, commentators believe. As they are highly unlikely to be able to invest in these companies directly, one of the best ways to access these illiquid assets is through investment trusts.

Past performance is not a reliable guide to the future. The value of investments and the income from them can go down as well as up. The value of tax reliefs depend upon individual circumstances and tax rules may change. The FCA does not regulate tax advice. This newsletter is provided strictly for general consideration only and is based on our understanding of law and HM Revenue & Customs practice as of October 2021 and the contents of the Finance Bill. No action must be taken or refrained from based on its contents alone. Accordingly, no responsibility can be assumed for any loss occasioned in connection with the content hereof and any such action or inaction. Professional advice is necessary for every case.