Scrapped PIMCO LIT sign of healthy market: LICAT
With PIMCO scrapping its listed investment trust launch, fixed income vehicles could struggle to see investor demand in an environment of rising rates, according to the Listed Investment Companies and Trusts Association (LICAT).
PIMCO scrapped the launch of its LIT last week, it had been seeking to raise $500 million for a Global Income Opportunities vehicle but pulled it due to insufficient local demand.
Angus Gluskie, chief executive of LICAT, said around 50% of potential vehicles failed to reach the final prospectus stage and around 20%-30% failed to make it to issue.
“The process of the market saying ‘no’ is the sign the market is acting the way it should, it is always about demand and if there isn’t demand for that asset class then it won’t get listed. We don’t want products to be listed unless there is a healthy demand,” he said.
He hypothesised the PIMCO fund may have been popular at early stage – it could take up to 18 months to come to market- but in the intervening months, markets were now forecasting rising interest rates which were unattractive for a fixed income product.
“Fixed interest tends to lose value as interest rates go up and people’s expectations are for rate rises globally so that means investors will be hesitant to go into anything related to fixed interest. This particular area of fixed interest which was seeking a higher yield might have also brought about higher credit risk which is a huge risk in this environment.
“PIMCO might have had a good idea but it is a hard sell in this dicey environment. A year ago when interest rates were low then it might have been attractive.”
He also said the global approach might have also concerned Australian investors who were wary about being exposed to geopolitical turmoil compared to Australian fixed interest vehicles.
AUTHOR
Laura Dew
Recommended for you
The increased bids for Insignia from Bain and CC Capital value the company at $3.3 billion, while there is still a possibility for competing bids from rival players such as Brookfield.
AMP and Clime Investment Management have shared how they are harnessing the power of social media to help the firms reach a younger demographic and increase brand awareness.
The number of Australian individuals with more than US$10 million in assets has passed 42,000, rising by 3.9 per cent over the past year.
A former Northern Territory financial adviser has received a seven-year ban from ASIC, having been convicted of supplying dangerous drugs and receiving or possessing the proceeds of their sale.
