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18 Jan 2021

Winterflood Monthly & Annual Review - January 2021

Annual Reports

Light at the end of the tunnel?

2020 was another good year for investment trusts, with its strongest relative return in the last 30 years. The FTSE Equity Investment Instruments index was up 17.8% on a total return basis compared with a decline of 9.8% for the FTSE All Share. The long-term performance of the sector is also impressive, up 167% over the last ten years compared with 72% for the FTSE All Share. In addition, investment trusts have outperformed the wider UK market in six of the last seven years.

Issuance in 2020 was strong, with £7.8bn raised last year, a 12% decrease on 2019 (£8.9bn) but 29% higher than the average annual level since 2008. Last year saw eight IPOs, including four in December. Secondary placings (84%) were the largest source of fundraising and demand for Renewable Energy Infrastructure remains healthy. Three new funds were launched in this sub-sector last year: Downing Renewables & Infrastructure (£123m), Triple Point Energy Efficiency Infrastructure* (£100m) and Ecofin US Renewables Infrastructure (£92m). Regular tap issuance increased once again, up 48% last year to £3.2bn, compared with £2.2bn in 2019.

The investment trust sector saw significant discount volatility last year. After starting 2020 at the historically narrow discount level of 0.9%, the dramatic market sell-off in March saw it widen out to 22%, a level not seen since the global financial crisis in 2008. However, this was relatively short-lived and the discount recovered to 8% by the end of March before recovering over the rest of the year. The sector average discount ended 2020 at 1.6%.

*Denotes a corporate broking client of Winterflood Securities