The best year for U.S. initial public offerings since the 1999 technology boom is driving record money into an exchange-traded fund that invests in newly listed companies, from Twitter Inc. to General Motors Co.
The First Trust U.S. IPO Index Fund attracted $165 million in the last three months of 2013, the most for a quarter since it started in 2006, according to data compiled by Bloomberg. That brought the total annual inflows to a record $280 million.
The Bloomberg IPO Index climbed 64 percent last year, the biggest jump in 14 years. The index was pushed by gains in Twitter and Hilton Worldwide Holdings Inc. Facebook Inc., which began trading in 2012, has the biggest weighting in the First Trust IPO fund.
Appetite for equities drove U.S. companies to sell $56 billion in new shares last year, the most since 2007. Investors poured the most money in almost a decade into equity funds, as Standard & Poor’s 500 companies added more than $3.7 trillion in market value. Demand for IPOs will remain strong, said Romain Boscher at Amundi Asset Management.
“People’s appetite for IPOs is back, and there is a mismatch between equity supply and demand,” said Boscher, who is responsible for equities at Europe’s biggest asset manager. “There was a sort of queue of companies planning to tap the market as soon as the opportunity was right. And now with higher prices and low volatility, that time has come. This is very favorable for IPOs.”
Companies raised about $22 billion in U.S. IPOs in the fourth quarter. Sales in Europe and Asia rose, too, helping global deals triple from the previous three months. S&P 500 companies have never been this valuable, with a market capitalization of $16.5 trillion. The performance of IPO stocks following their listing shows increased conviction in the outlook for the broader market.