Schroders seems to have overcome the curse of sustainability-related investment trusts, by raising £75m (€52.3m) for the IPO of the first London-listed investment trust targeting positive social impact.
It is the latest in a number of attempts by investors to launch such products, but previous versions have fallen flat. In 2017, high-profile investment expert and former head of the UK’s Investment Association, Daniel Godfrey, failed to raise £75m at IPO for The People’s Trust – a London-listed vehicle to promote long-term investing. That same year, an Impact Investment Trust supported by the Swiss and British governments and managed by Swiss-based Obviam, failed to raise enough to float on the London Stock Exchange. More recently, Aberdeen Standard Investments last year delayed the launch of its Global Sustainability Trust for the second time, after failing to hit its £200m target.
Schroders’ highly-anticipated British Opportunities Trust IPO raised just a third of its original £250m (€278m) target recently – a result which was attributed to a “very challenging market”. But the BSC Social Impact Trust, which is co-managed by Schroders and impact investor Big Society Capital, has come close to raising its £100m target.
The new vehicle will invest in a diversified portfolio of private market impact funds that address a range of social issues including homelessness, learning disabilities, shelter for victims of domestic abuse and care services for the physically and mentally unwell.
According to its prospectus, the trust aims to grow its portfolio to between £300m (€334m) and £500m (€556m) over the next five years, targeting a net asset value return of 2% plus inflation, net of fees. To make up its initial portfolio, it will deploy proceeds to acquire £40m (€44m) worth of assets – comprising five impact funds and two co-investment debt portfolios – from co-manager Big Society Capital.
While the trust will invest mainly in UK private companies, it expects to have around 15% exposure to non-UK assets.
Commenting on the IPO, Andy Howard, Global Head of Sustainable Investment at Schroders, said: “This is a unique product which gives investors access to a diversified portfolio of private market impact investments through a London listed vehicle for the first time. In addition to its clear focus on social impact, the Company seeks to provide an attractive and consistent return profile derived from investments with low correlation to equity market movements and that are frequently asset or government backed.”
In earlier remarks to Portfolio Advisor, Jeremy Rogers, Chief Investment Officer at Big Society Capital, said that a driving force behind the IPO was to make social impact investing accessible to retail investors.
“What Schroders was seeing from their clients is that there was increasing interest in trying to access this market but that access is through private funds, they have intermittent closes, and you need specialist knowledge to access it,” he said at the time.
Shares of the BSC Social Impact Trust are expected to begin trading on the London Stock Exchange on December 22.