1st June 2020
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With excitement around IPOs continuing to build, many more companies are lining up to become the next big breakthrough on public markets.
IPOs represent an exciting prospect for investors, providing an opportunity to participate in allocating capital to a company at the very start of its public trading life. An IPO or Spin Off can be a pivotal moment in a company’s lifecycle; the potential beneficiary of huge cash injections from investors placing confidence in the future of their business.
As IPOs tend to be young and innovative companies at the beginning of their growth trajectory, they have the potential to deliver superior returns to the broader market, and for this reason they can potentially be volatile. New listings are typically found in the hottest segments of the market, like automation, robotics, cloud computing and biotechnology.
Often those sectors are at the forefront of economic growth and innovation. However, not every new listing on the public market is destined to be a profitable investment. Speculation and hype surrounding individual stocks can often distort valuations, making them potentially volatile investments.
The IPO market can also be very difficult to time.
IPOs and Spin Offs can offer the latest in innovation across new buyouts and business models. Typically these companies have large amounts of freshly raised capital ready to deploy on new and exciting ventures. We call this “innovation beta”.
Thematic investors looking to allocate to IPOs and Spin Offs can benefit from quicker and targeted exposure to innovative companies coming to market, prior to their inclusion in broader indices.
We believe the digital transformation megatrend has accelerated the desire of companies to list on the public market. Companies are recognising that in order to maintain their perceived competitive advantage, they have to adapt their business model to include pioneering technologies such as AI, Cloud Computing and Machine Learning.
This has led to an encouraging and fertile IPO market for 2021.
Investing in the innovation of the European Economy
2021 saw the strongest European IPO activity in recent history, raising €22.6bn and already surpassing 2020’s full year IPO issuance of €20.3bn.
Learn more how to access this growth potential and the innovation of the European economy, via pure play access to the best performing and most attractive European IPOs prior to their inclusion in mainstream equity indices, delivering innovation without the single stock risk.
Why First Trust?
Our IPO & Spin Off strategies offer thematic investors a potential solution based on a well-researched, disciplined and transparent index methodology. Our strategies provide investors with pure play access to the potential growth and innovation of new listings in a single portfolio, prior to their inclusion in mainstream equity indices, delivering innovation without the inherent single stock risk.
IPOs and Spin Offs can offer the latest in innovation across new buyouts and business models. Typically these companies have newly raised capital from raising cash, ready to deploy on new and exciting ventures. We call this “innovation beta”.
Exposure to those companies entering the market or spinning off from a parent, benefitting from cash injections and poised for long-term growth. The unique nature of our IPO strategy’s growth exposure results in minimal overlap with broader indices.
Our IPO strategies offer targeted exposure across a variety of companies that are not yet widely held by many investors, acting as a natural diversifier for investor portfolios. Both strategies’ factor footprints exhibit positive exposure across growth, quality, momentum and low volatility.
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