After a sustained quiet period in the listed fund space, JTC recently supported the first premium investment trust IPO on the London Stock Exchange since late 2021.
Reflecting on that deal, Simon Gordon and Susan Fadil, Senior Directors within JTC’s Fund and Corporate Services team, explore the current state of the market and where things are heading in the listed space.
We’ve not seen a premium fund IPO in London since late 2021 – what’s the background to the slowdown in this space?
Simon Gordon (SG): It’s a case of the prevailing market conditions. High interest rates and rising inflation have meant that this space has been less attractive from an investor perspective than other financial instruments, which might have less risk attached to them. It’s also been difficult in the current environment to get accurate valuations, which has again made the listing and subsequent fundraising process more complex.
Susan Fadil (SF): Perhaps counterintuitively, it’s that void in fundraising that presented an opportunity for a new good quality listed fund. Investors still have capital to put to work and, wherever they look, currently there is uncertainty and volatility. At the same time, there is a sense that inflation may be beginning to ease. All that has come together to help reinstate some confidence amongst investors in this type of investment. It’s historically been all about yield, but a growth fund such as the one we have just worked on actually presents an interesting alternative opportunity for investors.
The listing on the premium segment of the LSE’s main market of Ashoka WhiteOak Emerging Markets marked the first fund IPO since November 2021. What was JTC’s role in that listing?
SF: Ashoka WhiteOak Emerging Markets (AWEM) is a new investment trust that aims to raise capital by exploiting an attractive entry point in emerging markets, where valuations are currently low relative to developed markets.
Our role was fairly typical of a premium London listing – pre-IPO, we managed and coordinated all the governance documentation, created a governance framework in what is a highly regulated area, established necessary custody accounts, and helped embed the required processes into the listing timeline. Post-IPO, we will continue to provide ongoing company secretarial and governance support and provide regular reports and accounts.
SG: Critically, we acted as the liaison focal point that brought together all the parties involved, so it was important to have a good relationship with the fund board and all advisors and have a deep understanding of what is needed and when to keep the process running efficiently. That’s particularly important in a scenario like this, where we can offer cross time-zone support where the fund manager is outside Europe (the AIFM is in Mauritius but the Fund and Board is in UK) and the investment adviser is in Singapore.
To be involved in the first successful IPO of an investment trust since November 2021 is hugely exciting. Supporting LSE-traded funds and companies is a core area of focus for JTC and we’re looking forward to supporting the ongoing growth plans for AWEM.
After such a quiet period in this market, did this listing present any particular challenges?
SF: Although not necessarily challenges, this listing acted as a clear reminder of the importance of timing and good communication in ensuring a successful premium segment IPO.
After something of a hiatus in this space, good communication was so important in making sure that all interested parties – often in different time-zones – were clear on the processes and requirements. Good communication plays a fundamental role in bringing all the players to the table and guaranteeing a successful outcome. Timing was also important – there was a window to get this listing done and that meant there was a need to remain agile and stick to our goals in an often highly compressed timeframe. But at JTC we have a multijurisdictional team that can come together to act as a well-oiled machine in exactly these sorts of circumstances.
Why does the LSE continue to offer an attractive proposition for listing funds?
SG: The past few years have been challenging for all financial markets, and there’s no doubt that keeping the investor solutions space fresh and providing new high-quality options can certainly help in encouraging capital flows. In that sense, this latest IPO can be seen as a big boost for the London market. It’s a reminder of what makes London such an attractive investment centre – its role in providing liquidity, its premier stock, its ability to attract an institutional investor base, its reputation for high quality regulation and mature governance, and the access to specialist expertise.
Does this listing indicate a revival in listings on the LSE?
SF: It’s likely that 2023 will still be a quiet year on the listings front, as the markets continue to, hopefully, settle. That sort of stability and calm is really important. There are still many factors at play, but undoubtedly more listings could follow.
SG: The market needs a window for the right opportunity. Timing is everything. But as the inflationary conditions ease, there’s every possibility that later this year we could see more fund listings.