Gabelli trust may have a tough time, analysts predict.
Experts have warned that a new US investment trust coming to the UK market may struggle to get off the ground.
Gabelli Asset Management, a US-based investment manager, is raising money for the Gabelli Value Plus+ Trust, a new
investment trust that will invest in US equities.
The trust is aiming to raise between £100m and £250m, and its chairman will be Andrew Bell, who is also chairman of the
Association of Investment Companies.
But the asset manager may struggle to hit that target, according to investment trust analysts, who do not think there is demand
here for a US equity trust.
Stephen Peters, Charles Stanley’s investment trust analyst, said: “New launches within US equities are very difficult” because “the
market is so efficient, so well covered by open-ended funds and [an] exchange-traded fund [ETF] is a very easy and cheap
solution for such a difficult market for active managers to outperform in”.
“They will have to work hard to convince investors that buying the US market in a listed fund is better than doing so through
open-ended funds or ETFs.”
Gavin Haynes, managing director of Whitechurch Securities, said the group would have to generate a lot of interest from
institutions because Gabelli “[does] not have any retail presence in the UK”.
He added that the expected total expense ratio of 1.23 per cent might “be off-putting when comparing against the wide choice of
actively managed open-ended US offerings”.
The group will also need to buck a poor record for US equity investment trusts, which have struggled to gain traction in the UK.
In 2012 the F&C Barrow Hanley US trust was pulled after failing to reach £100m and, in the same year, the Black Rock North
American Income trust raised just £65m against hopes for £200m.
The BlackRock trust recently had to buy back 20 per cent of its shares. Investors were keen to sell out after the trust had
struggled relative to the index since launched, according to Numis.
Gabelli is hoping to do better than its fellow US entrants by offering a particularly active fund that is agnostic to the index.
Macrae Sykes, a research analyst on the Gabelli trust, said: “Most of what is offered [in the UK] uses the S&P [index]. We are
independent and agnostic to the index. I think the market will find it refreshing to see such a fund actively investing.”
The trust will invest in roughly 100 stocks, and will have a mid-cap bias, with holdings having an average market value of
£20bn-£30bn compared to the S&P 500’s average of around £130bn.
Simon Elliott, head of research at Winterflood, said: “Gabelli is a well-known US manager whose pedigree is reflected by the
quality of the board that the prospective investment trust has attracted.
“If Gabelli is successful in raising £250m, it would be the largest IPO for an investment trust investing in equities since 2010, when
the Fidelity China Special Situations trust raised £460m.”
Investec Bank is running the share placing, which is expected to close in the middle of February.
Gabelli’s PMV is its USP
Gabelli Asset Management was founded in 1976 by Mario Gabelli and has grown in the past four decades to manage $46.9bn
(£31.1bn) in assets.
The company was initially set up as a research firm for institutional investors and it claims that focus on an “intense, researchdriven
culture” has underpinned its success when branching out into fund management.
It opened an office in the UK in 2001 but the new investment trust represents its first foray into the UK retail market.
Gabelli is primarily an equity-focused asset manager, with the vast majority of its open-ended funds investing in equities under
either a growth or value style.
The new trust will follow the firm’s private market value (PMV) strategy, which the firm has used on its value funds since 1977.
The firm said the strategy has generated an annualised return of 16.8 per cent since 1977, versus 11.8 per cent for the S&P 500 index.