Actionable Ideas for Companies and Sponsors
Closed-End Investment Funds Provide Issuers with an Opportunity to Create New Companies Focused on Alternative Asset Classes
Closed-end investment funds are used by management teams to raise capital for newly created listed companies that invest in a specific asset class. European listed funds have raised $18 billion year-to-date. The UK continues to be the dominant market in Europe and represents approximately 50% of fund issuance. The growth of closed-end investment funds is driven by institutional investors’ interest in public companies that provide exposure to alternative asset classes, including renewables, healthcare, real estate, credit strategies, infrastructure and private equity. Assets that generate a mid-single-digit dividend yield and a total return close to 10% are particularly attractive. These funds require a portfolio of seed assets or a clearly identified pipeline to have the IPO proceeds fully invested within 9-12 months. The most successful funds also have the ability to scale up the business and become multi-billion market cap companies through the issuance of multiple follow-on equity offerings that continue to provide growth capital for asset acquisitions over time.