Potentially high demand for Liontrust’s first investment trust could see it quickly trade at a premium to net asset value once it starts trading in June.

Liontrust has a reputation for being one of the best asset managers in the ethical and environmental investment space. Its £1.4 billion Liontrust Sustainable Future Global Growth Fund (3003006) has been a top quartile performer over the past five years, returning 145% versus 97% from the IA Global sector, according to FE Fundinfo.

Investors will no doubt be hoping for a similar strong performance when Liontrust ESG Trust hits the market, yet Shares believes that investors may not be able to get as much as stock as they like in the launch offer. That could lead to big demand for the stock once it starts trading as investors seek to top up their positions.

Allocations in the share offer could be scaled back given Liontrust is understood to be targeting a mere £250 million maximum at launch. Shares understands that retail investors will be given the opportunity to apply for shares in the listing offer, creating an even bigger pool of people trying to obtain stock.

Liontrust is unlikely to want too much money on day one as it is partially targeting the small cap space for the new trust and won’t want to end up owning too big a stake in portfolio companies. It will have a concentrated portfolio of between 25 and 35 holdings.

The trust will be managed by Peter Michaelis, Simon Clements and Chris Foster, members of the firm’s sustainable investment team.

The decision to launch its first investment trust rather than another open-ended fund was driven by the permanent nature of the capital structure.

When an investor in an investment trust wants to get out, they simply sell the shares to another investor and the fund manager is theoretically unaffected.

In contrast, with open-ended products the fund manager must return cash to the investor when they exit, which in an extreme situation can mean having to sell some of the investment holdings.

Liontrust ESG Trust will invest in companies from around the world which help create ‘a cleaner, safer and healthier world’ through the more efficient use of resources, greater safety and resilience and improved health.

By including small-cap stocks, Liontrust ESG Trust will be competing for ideas with the recently revamped Jupiter Green Investment Trust (JGC), which under new lead manager Jon Wallace has shifted its focus to smaller, innovative companies in ‘difficult to tackle’ sectors.

Liontrust ESG Trust’s annual management fee has been set at 0.65% of net assets. Up to 10% of the fees from the trust will be used to fund research to identify and develop financial instruments covering UN Sustainable Development Goals that are currently uninvestable.

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