Octopus, the UK fund manager, will next month launch its first ‘direct access’ listed investment trust purely focused on renewable energy assets. The trust hopes to raise £250 million when it lists on the London stock exchange next month and will commit to a 3% return on investment over its first year of activity. The longer term target is to return between 7% and 8% to investors annually.
The Octopus Renewables Infrastructure Trust will both own and operate renewable energy infrastructure assets including solar, wind and hydro installations. Matt Setchell, who is co-head of Octopus Renewables, commented:
“This will bring direct access to renewable assets for investors.”
Octopus Renewables, part of the Octopus Group that also has a venture capital arm which is one of the UK’s biggest providers of VCTs, and a household energy supplier business, is one of Europe’s largest owners of solar power assets. Globally, it manages over £3 billion worth of renewable assets. The infrastructure trust has itself built renewable assets valued at over £1.2 billion and has at least another £350 million worth under construction.
The company hopes to serve increasing demand from institutional investors for environmentally friendly and ethical investment options. As concerns over the impact of climate change, not least the damage it will do to economies and businesses, increase, institutions are quickly increasing the amount of cash they put into renewables. Over the first half of 2019 a record £1.1 billion of capital flowed into renewable energy and infrastructure trusts, says data published by the Association of Investment Companies.
And these trusts are benefitting from that increased investor enthusiasm with their shares trading at an average of 14% above the net value of the assets they hold. Across all trusts the average trading price of shares is at a 4% discount to their net asset value.
The Octopus Renewables Infrastructure Trust will look to raise its initial £250 million investment capital target from institutional investors. However, retail investors who might be keen on exposure to renewables also have a number of options. There are currently ten specialist renewable energy trusts open to retail investors and they return an average yield of 5.5%. They also tend to trade at a price above their net asset value – an average of 7.5% ahead of it.
They have also performed well on share price returns, with investors seeing the trading price of renewable energy trust units rising, writes Ian Cowie for Citywire, 16% over the year to March and 63% over five years. However, with most renewable energy funds relatively new, only four, Bluefield Solar Income, Greencoat UK Wind, Renewables Infrastructure Group and Foresight Solar Fund, have a 5-year track record.