Investors flocked to buy into recent fundraisings from Tritax Big Box, International Public Property and HICL Infrastructure, which scooped up the most new investor capital in the second quarter of 2017. 
According to a research note from Canaccord Genuity, the trio of investment trusts raised an aggregate £954m in the second quarter of this year, all of which were significantly oversubscribed.
Indeed, of the 11 investment companies to raise more than £100m in the second quarter, 10 were alternative companies, the research showed, with Scottish Mortgage Investment Trust the only non-alternative trust.
Key net fund flows in Q2 2017
Source: Canaccord Genuity
Broker Numis Securities said: “The sector continues to benefit from strong demand for existing funds trading on premiums, with secondary issuance of £4.09bn in the first half of 2017, including £2.67bn in Q2 which represented a record quarter.
“The largest issues all had alternative income mandates, including the infrastructure funds: INPP (£330m) and HICL (£269m)."
However, it added: “We do not expect this level of secondary issuance to be sustained as yield compression means that many infrastructure and renewable energy funds are now struggling to buy operating assets that meet their return targets.”
With less issuance expected in the second half of the year, below FE Trustnet takes a look at those that took full advantage of investors’ appetite in the first half.
The fund that raised the most capital is Tritax Big Box, which raised £350m in May through a placing, open offer and offer for subscription, at a price of 136p, which was slightly ahead of the net asset value of 129p.
Since then the firm, which buys and leases out warehouses and ‘logistics facilities’ in the UK to companies such as Morrisons and giant Unilever, has acquired two assets for a combined £113m with more deals expected.
Broker Stifel said: “Tritax has a strong track record of acquiring logistics warehouses in a timely fashion, and intends to have the net proceeds of the placing invested by the end of this year.
“We assume it will meet this timeline, with an additional £350m of acquisitions in 2017 on top of the £200m we had previously forecast.
“The company has made two acquisitions in the last month, a £20.9m warehouse in Doncaster let to Unilever and a £92.3m distribution facility in Birmingham let to Ocado and Morrisons.”
The broker updated its forecast, noting that it expects the firm to return 8 to 12 per cent to investors this year through a combination of its progressive dividend policy and share price movements.
“Tritax's shares have been well-supported by the 4.4 per cent dividend yield, fully covered by earnings, and positive sentiment towards logistics assets, of which it is the only pure specialist in the UK Reit market,” the analyst said.
“Having risen 12 per cent over the last 12 months, beating the sector, we think that the shares can continue to outperform on a relative basis, and maintain our Hold rating with a target price of 152p.”
The £1.9bn company has returned 7.85 per cent so far this year, ahead of the IT Property Specialist sector average by 2.6 percentage points, as the below shows.
Performance of fund vs sector in H1 2017
Source: FE Analytics
Currently the real estate investment trust (Reit) has a share price of 144.50p. It is 21 per cent geared, on a 10.7 per cent premium to net asset value (NAV) and yields 4.4 per cent, according to the latest data from the AIC. It has ongoing charges of 0.93 per cent.
The second biggest issuer was International Public Partnerships (INPP), which raised £330m in an oversubscribed placing in May.
Numis Securities said: “This reflects continued strong demand for the return profile of the asset class, combined with a healthy deal flow of new investments since mid-2016.”
The £2.1bn firm, which invests in public or social infrastructure assets, made a number of acquisitions in the first half of the year.
“This comprised a £274m investment for a 4.4 per cent stake in Cadent, a consortium which acquired a 61 per cent interest in the National Grid gas distribution network,” Numis Securities said.
“A further £22.6m was invested into the Tideway Project, leaving £55.7m of future commitments, currently supported by a letter of credit under INPP’s £400m RCF.
“In addition, the manager has acquired an additional interest in the Wolverhampton BSF project for £1.5m.
“The portfolio currently comprises 127 projects, of which 10 per cent of assets are under construction. The weighted average investment life is 35 years.”
In the first half of the year the firm achieved a total return of 5.01 per cent, a significant outperformance of the IT infrastructure sector which lost 0.72 per cent.
Performance of fund vs sector in H1 2017
Source: FE Analytics
Numis Securities added: “Portfolio performance and outlook remain positive and we believe the manager continues to position the fund to deliver attractive risk adjusted returns through the economic cycle, underpinning the current valuation.”
The company is not geared, is on a discount of 9.5 per cent, yields 4.3 per cent and has an ongoing charges figure of 1.24 per cent.
The third and final fund is HICL Infrastructure, which raised £260m in March in order to fund further acquisitions.
Since then the firm this week also raised gross proceeds of £267.7m through the issue of 162.2m shares at 165p - a 12 per cent premium to the NAV of 147p.
This will fund its recent acquisition of a 36.6 per cent equity interest in the Affinity Water group for £269m – an announcement made back in May.
Affinity Water is the largest water‐only (i.e. not including sewerage) company in England and Wales by revenue and population served, with a regulatory capital value of £1.1bn as at 31 March.
Research house Winterflood Investment Trusts said: “Demand for the fund's shares remains strong, as evidenced by the recent equity issue, which was significantly oversubscribed.”
The trust returned 0.02 per cent over the first half of the year, as the below shows, though it has turned slightly higher this week following the announcement of the second successful placing.
Performance of fund vs sector in H1 2017
Source: FE Analytics
Canaccord Genuity said: “HICL remains our core recommendation for a low risk exposure to the asset class.
“An attractive, sustainable and growing dividend has obvious attractions whilst an inflation correlation of 0.7 per cent (rising to 0.8 per cent following the Affinity Water acquisition) provides explicit inflation protection.
“Given capital preservation characteristics and low correlation with other asset classes, we believe HICL has an important role to play in strategic asset allocation.”
The trust is not geared, is on a 7.4 per cent premium to NAV, yields 4.9 per cent and has charges of 1.26 per cent.