Kleinwort European trust raises pounds 500m: 'El Sids' push privatisation fund to record - Mercury plans even bigger launch

THE LARGEST investment trust launch in history has been pulled off by Kleinwort Benson, whose Kleinwort European Investment Trust (Kepit) has raised pounds 500m.

Total subscriptions for the trust were pounds 880.5m, and the public offer was three times oversubscribed.

As a result of demand in the UK and across the Continent from small investors, dubbed 'el Sids', Kleinwort has been forced to scale down applications.

Kepit is the first investment trust dedicated to investing in privatised European companies. It will invest in recent and new issues on the Continent and in the UK.

Yesterday Mercury Asset Management announced its own, bigger Mercury European Privatisation Trust, which will close on 2 March. Mercury is aiming to raise pounds 575m.

Simon White, managing director of Kleinwort Benson Investment Trusts, said: 'People are familiar with the concept of privatisations over here, and hope to see it work over there. Investors are also seeking to get away from low interest rates. It has struck a chord with the investing public.'

Mr White said Kepit had received applications from investors in France, Italy, the Middle East and Hong Kong, as well as substantial interest from Switzerland. The vast bulk of the trust had gone, however, to UK investors.

The placing raised pounds 320m from institutions, stockbrokers and intermediaries. The remaining 180 million shares were available to the public. The trust is partly paid, and the balance is due on 1 August.

Before the launch of Kepit the biggest launches were Mercury World Mining Trust last December with pounds 426m, London Insurance Market Trust in November with pounds 280m and M&G Income in March 1991 with pounds 246m.

Applications for Kepit from Kleinwort Benson Managed Funds represented less than 5 per cent of total applications. Kleinwort Benson Investment Trusts is the investment trust division of Kleinwort Benson Investment Management, itself a subsidiary of the merchant bank Kleinwort Benson, chaired by Lord Rockley.

The offer has been scaled down, so that for every five ordinary shares allocated, investors will receive one warrant at no extra cost. Allocations have been scaled back on a sliding scale so that applicants for 2,000 shares will receive 35 per cent of their requested total, while those for over 2 million shares will get 25 per cent.

Mr White said: 'If there is any disappointment with such an immense success, it is that we have been unable to satisfy the appetite for shares in full. We firmly believe that pounds 500m (of which pounds 250m will be available for immediate reinvestment, because of the partly paid structure) is an appropriate size for the trust. This reflects the current state of development of the European privatisation programme and the underlying level of liquidity in our target investments.'

Interim share certificates and cheques for money to be returned will be despatched on 8 February. Dealings in ordinary shares and warrants are expected to start separately on 9 February.

(Photograph omitted)