The Global Sustainability Trust is part of a growing trend of investment trusts tapping into unlisted stocks.
Aberdeen Standard Investments has been appointed as the managers of a new private-equity focused sustainable investment trust: The Global Sustainability Trust (or the GST).
As the name suggests the trust will invest in companies that have ‘a positive environmental and social impact.’ It will do so through backing private companies, those not yet listed on public markets.
According to Andrew Dykes, deputy chairman of The Global Sustainability trust, the decision to appoint Aberdeen was largely a result of the asset manager’s strong expertise in investing in unlisted firms. ‘The independent panel was very impressed by the experience and breadth of expertise shown by the private markets team at Aberdeen Standard Investments,’ he said.
Dykes adds the trust will report regularly to investors on the intended and actual impact of each investment, taking into account the 17 United Nations Sustainable Development Goals and underlying targets.
GST hopes to raise approximately around £200 million upon launch. Veteran investor Mark Mobius recently launched his new investment trust aiming to raise the same amount. However, investor appetite was somewhat lacking, with the trust securing just half its intended amount.
The trust expects its prospectus to be published by the end of this month, with the launch date slated towards the end of November 2018.
Why trusts are tapping into unlisted stocks
This is the latest in an uptick in actively managed investment trusts offering investors access to unlisted shares. Ballie Gifford recently launched its US Growth trust, which has a remit to invest up to 30 per cent in unlisted shares, while Merian Global Investors (formerly known as Old Mutual Global Investors) is in the process of launching its own trust that will invest in private companies.
The decision to invest in unlisted companies is often put down to the growing length of time it now takes a US company to go public. Thanks to greater access to private capital, the average age of US technology companies that went public in 1999 was four years, whereas in 2014 it was eleven years.
Being able to invest in the private stage allows managers to get in earlier, when companies are growing at their fastest. A similar trend is playing out in other developed markets, including the UK, with the number of stocks listed on the AIM market falling over the past decade
More cynically, however, the growth in private company focused trusts can be seen as a result of the continued pressure passive investing is putting on active managers. Numerous studies have shown that index trackers have beaten most active managed funds and trusts when fees are accounted for. By promising access to private companies, active can be seen as offering a new edge that index trackers, by definition, cannot compete with.
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