Ian Cowie: is there hope for standout stinker in my ‘forever fund’?
9th December 2021 09:48
by Ian Cowie from interactive investor
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This investment trust has destroyed two-thirds of shareholders’ money since IPO in April 2015.
Will the €1.5 billion (£1.28 billion) valuation of an artificial intelligence (AI) business, agreed as part of Europe’s biggest special purchase acquisition company (SPAC) merger, bring joy at last to long-suffering shareholders in a former ‘star fund manager’s’ investment trust?
Yes, you guessed, I am talking about a standout stinker in my modest portfolio, Schroder UK Public Private Trust (LSE:SUPP). Formerly known as Woodford Patient Capital (WPCT), this trust has destroyed two-thirds of shareholders’ money since its initial public offer (IPO) in April 2015.
Perhaps surprisingly, SUPP still appears to have total assets of more than £538 million, despite the fact shareholders can sell up whenever we like - unlike many unit holders in the eponymous Neil Woodford’s open-ended funds.
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‘Sell’ - not ‘sorry’ - seems to be the hardest word for many long-term investors who had hoped to help fund the commercialisation of British universities’ research into healthcare and other hot sectors. But making money is more difficult than making the right noises and SUPP shares continue to trade about 30% below their net asset value (NAV).
On a brighter note, hopes were raised by news this week that this trust’s fifth-most valuable holding, Benevolent AI, is to list on Amsterdam’s Euronext exchange next year in combination with a SPAC called Odyssey.
The company aims to raise €390 million, including €135 million from a private placement involving Temasek, the Singapore state-backed investment company, and the pharmaceutical giant, AstraZeneca (LSE:AZN). Despite all those big names and numbers, SUPP’s share price remains just 33p.
However, Tim Creed, the SUPP fund manager, told me: “If we look at the progress we have made since Schroders took over management of the trust, there has been a leap forward in the repositioning of the portfolio and in the financial position, specifically regarding full repayment of SUPP’s outstanding debt.
“We believe that our initial strategy of repositioning some of the legacy holdings and protecting shareholder value has resulted in the portfolio being in a stronger position today. We have an exciting pipeline of new private company investments and believe these will deliver long-term future growth for shareholders.”
Ewan Lovett-Turner, a partner at the stockbroker Numis, sees some grounds for cautious optimism. He points out: “In a separate transaction, SUPP has invested €11.8 million in a digital health company.
“Ada Health has developed an AI-based health assessment and care navigation platform that helps users understand their symptoms and identify conditions with a high degree of medical accuracy.
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“The business has a consumer symptom assessment app with over 11 million users, of which more than 1 million are in the UK.”
There could be more innovation to come, according to Kieran Drake of SUPP’s house broker, Winterflood, who said: “Having previously had significant borrowings, the fund is now in a net cash position. This has enabled the managers to make new investments and given them a greater ability to shape the portfolio.”
Against all that, Alan Brierley of Investec, recently slapped a ‘sell’ note on SUPP. He explained: “Although the ONT float comfortably exceeded expectations, the resultant spike in SUPP’s share price was surprisingly modest and very short-lived.
“The company’s third-quarter update concludes we may see further headwinds in the inherited portfolio. Meanwhile, having started a new investment programme, the subsequent performance of Johnson Matthey (LSE:JMAT) and Petershill Partners (LSE:PHLL) has been underwhelming.”
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More than six years into what I originally expected to be a 10-year investment, I hope Drake and Lovett-Turner prove right about this trust, but fear Brierley might prove nearer the truth. Either way, with little enthusiasm and less than 0.3% of my life savings at stake in SUPP, I intend to see this one out.
Ian Cowie is a freelance contributor and not a direct employee of interactive investor.
Ian Cowie is a shareholder in Schroder UK Public Private Trust (SUPP).
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