8% to 10% return targets for two trusts planning IPOs

One trust will invest in infrastructure, while the other will specialise in UK energy storage assets. 

Two new investment trusts have been proposed, targeting eye-catchingly high returns of 8% to 10% a year.

Pantheon Infrastructure is attempting to raise £300 million, while Harmony Energy Trust is seeking £230 million.

Pantheon Infrastructure will be available to both institutional and retail investors, and initially sold for a price of 100p per share. The ticker will be PINT.

The trust will invest in infrastructure across several different sectors. These will include digital infrastructure (such as wireless towers, data centres and fibre-optic networks); renewables and energy efficiency (such as smart infrastructure, wind, solar and sustainable waste); power and utilities (including transmission and distribution networks); and transport and logistics (such as ports, rail, roads, airports).

The final sector the trust will focus on is ‘social and other’, which will include education, healthcare, government and community buildings.

According to the trust, these areas “can offer a stable yield while delivering essential services to local and national governments”.

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The trust says that there is a projected $13 trillion (£9.5 trillion) shortfall in capital expenditure globally required to improve ageing infrastructure and build new projects by 2040.

The trust will aim to fill its portfolio with eight to 12 assets within nine to 12 months of the IPO. The trust is aiming to provide a net asset value (NAV) return per year of 8% to 10% when it is fully invested.  

Commenting on the listing, the trust’s chairman Vagn Sorensen said: “We are very pleased to announce the launch of PINT, which is an exciting opportunity for investors to gain access to attractive risk-adjusted returns from infrastructure assets that benefit from long-term contractual cash flows, and have a positive correlation to inflation and favourable exposure to secular changes in society.

“Pantheon has a proven track record of delivering strong returns by applying a disciplined investment process across a globally diversified portfolio and we are confident that their approach, which focuses on co-investing, thus minimising fees while maximising the number of investment opportunities it can access, offers a compelling and differentiated opportunity for investors.”

Harmony Energy Trust, meanwhile, will invest in UK energy storage assets. The trust will focus on investing in commercial scale energy storage and renewable energy generation projects, with its initial focus being on battery energy storage systems in the UK.

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The company has struck a deal with Tesla (NASDAQ:TSLA) in respect of its initial portfolio of battery storage projects.

Once fully invested, the trust will target NAV total return of 10% a year over the long term. The expectation is this will mostly come from dividends, as the trust is aiming for a dividend yield of 8% a year, payable quarterly from 2023.

Norman Crighton, prospective chairman of Harmony Energy Income Trust, said: “The company offers investors the opportunity to invest in a rapidly growing part of the renewables sector; as wind and solar renewable energy projects increase, so too will the need for battery storage energy systems. The nation is becoming increasingly aware of the need to have the right infrastructure in place to secure our energy supplies. As we increase our reliance on renewable power, battery storage will have a crucial role to play.”

Investment trusts have been in high demand in 2021, with a record amount already raised for a calendar year.

On the IPO front, there have been nine new trusts so far this year, which have raised a collective £2.1 billion. This figure exceeds the amount raised by IPOs in both 2019 and 2020.