Crooke, who has run the five crown-rated trust since 1997, has a positive outlook for the global economy, recently telling FE Trustnet that he believed equities were still well priced, despite the recent surge in the asset class.This outlook, and his preference for assets that can pay a high dividend compared with the market while also delivering a degree of capital growth, has led him to the Greencoat UK Wind investment trust, which he snapped up as soon as it was launched in March this year.
Crooke thinks the trust will benefit from the shift to renewable sources of energy, which he says has already taken place.
"I am optimistic and willing to say there isn’t another recession around the corner. As that is the case, I am happy to hold more stable growth stocks," Crooke said.
"Greencoat UK Wind is an investment trust that invests in wind farm projects with capacity of over 10MW."
"The company was seeded with operating wind farms from Scottish Southern Energy, which retained a stake in the company."
"The dividend yield is projected to be 6 per cent and should grow in line with inflation. The company will benefit if electricity prices keep rising and will also purchase further wind farm projects over time."
"There is limited development risk as they only intend to purchase already operating assets," he added.
Greencoat UK Wind is managed by Laurence Fumagalli and Stephen Lilley. It has already raised £254.8m worth of assets, which should comfort any potential investors worried about stability and liquidity. It does not currently use any gearing.
Crooke bought the trust at its IPO (initial public offering) in March for 100p a share. His investment has made a decent start; according to FE Analytics, the trust has returned 5.79 per cent since then.
Performance of trust since Mar 2013
Source: FE Analytics
The trust has attracted a lot of attention from institutional investors, pushing it on to a premium of 9.6 per cent.
Nevertheless Kieran Drake, research analyst at investment trust specialist Winterflood, says this should not be enough to put off investors who are interested in the long-term potential of the trust.
"We were actually involved with the launch of Greencoat UK Wind and we classify it as a trust that sits in the infrastructure space," he said. "When looking at the premiums in the sector, nearly all of them are that high."
"We view it as an attractive long-term holding, especially for income investors, as they are targeting a 6p dividend [or 6 per cent yield], which will rise in line with inflation."
"One of the key points about the trust, which the management team stresses makes them differ from other trusts in the space, is that they are targeting a 9p [or 9 per cent] annual total return."
"That gives them scope to pay their dividend, grow their NAV and reinvest excess income into new wind farms," Drake added.
Infrastructure trusts are among the most sought-after vehicles in the AIC Investment Companies universe.
According to the AIC, six of the seven trusts in IT Sector Specialist: Infrastructure are trading on premiums. These include HICL Infrastructure, which is trading at a 10.2 per cent premium, and 3i Infrastructure, which is trading at a 5.7 per cent premium.
Both are yielding around 5 per cent and have delivered good risk-adjusted returns in recent years.
Performance of trusts over 3yrs
Source: FE Analytics
According to the trust’s factsheet, the Greencoat UK Wind IT aims to generate its yield by investing predominantly in UK wind farms, but it has the flexibility to hold 40 per cent of its assets in offshore farms.
The investment trust currently owns six wind farms, five of which are situated in the UK. The other is the Rhyl Flats wind farm, which sits just off the coast of North Wales.
The management team says the trust’s dividend should increase with inflation, because revenues will be linked to the wholesale electricity price.
In its most recent prospectus, the board of Greencoat UK Wind highlighted why investing in UK wind farms is an attractive proposition over the longer term.
"The UK has a legally binding obligation to ensure that 15 per cent of primary energy use is derived from renewable sources by 2020."
"The board considers that the utility owners and developers of operating UK wind farms will seek to attract new and long-term focused capital into the sector, either through outright sales of, or co-investments into, operating wind-farm assets."
"This should allow the current owners of such assets to re-invest the capital into their existing development programmes."
"Such sales are an opportunity for the company to enlarge its portfolio by making further investments."
As the trust has been launched recently, it is too early to calculate its ongoing charges figure (OCF).
