Ian Cowie: two of my most exciting investment trust holdings

As the old year ends and a new one begins, never mind all the crystal ball-gazing you can get elsewhere.

Two of my most exciting investment trusts can see their future in the stars - including one extraterrestrial high-flyer whose share price doubled in 2025.

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Step forward Seraphim Space Investment Trust Ord (LSE:SSIT), the only London-listed pooled fund to focus on satellites and space technology, where I paid 53p last March for shares that traded at 115p on Christmas Eve. Better still, there are good - and bad - reasons to expect its stratospheric ascent to continue in 2026.

More than three-quarters of Seraphim’s net asset value (NAV) is invested in defence-related space technology and two-thirds of the total is based in Europe, including the United Kingdom. So, sad to say, this investment trust is a double beneficiary of the war in Ukraine and American indifference prompting a boom in military spending on the Continent.

Eyes in the sky - or, more formally, satellites delivering real-time intelligence about enemy activity - are vital to modern warfare and likely to become more so. Two events on the Friday before Christmas demonstrated how these trends are driving the Seraphim share price higher.

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First, European leaders agreed to advance a €90 billion (£79 billion) interest-free loan to Ukraine to fund its fight against Russian invaders after repeated warnings from the US President Donald Trump, and his vice-president, JD Vance, that the Continent must pay more for its own defence.

As reported here in April, Vance said: “The reality is that Europe’s security infrastructure, for my entire life, has been subsidised by the United States of America,” before he added that we cannot be “a permanent security vassal of the United States”.

Second, on the same day the €90 billion loan was agreed, Seraphim’s biggest asset, a Finnish satellite-maker called ICEYE, announced that it had signed a €1.7 billion contract with Rheinmetall AG (XETRA:RHM), Germany’s largest arms manufacturer, to supply intelligence to that country’s armed forces. ICEYE’s satellites specialise in synthetic aperture radar (SAR), which gives precise location information - accurate to within 50 centimetres - and can see day or night, through clouds and even vegetation. Artificial intelligence (AI) is used to analyse this information.

More than a third of Seraphim’s NAV, 34.7% to be precise, is invested in ICEYE, which was valued at €2.4 billion during a private equity funding round in September. On the day Seraphim’s joint venture with Rheinmetall was announced, the SSIT share price soared 19% higher and it is now the fifth-most valuable holding among 57 shares in my forever fund.

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While we must all hope that the bloodshed ceases in Ukraine and elsewhere as soon as possible, most European countries - including Britain - are committed to increase defence spending. Whatever else happens, America’s foreign policy is likely to remain unpredictable and Russia has demonstrated that it is dangerous.

On the day of the Rheinmetall deal, Seraphim’s chief investment officer, James Breugger, said: “This landmark contract reinforces ICEYE as the global leader in sovereign space-based intelligence and highlights a major shift in defence strategy by European governments from reliance on legacy systems to resilient, AI-enabled satellite constellations.

“As space becomes an essential domain for national security, ICEYE is emerging as a mission-critical partner for defence forces worldwide. This agreement reinforces SSIT’s conviction that companies delivering low-cost, high-resolution satellite-based intelligence gathering capabilities, combined with rapid production and advanced analytics, are driving a surge in demand and creating sustained growth opportunities across our portfolio.”

Seraphim pays no dividends and its charges are on the high side, at 1.77% per annum, but the managers can argue that they earn their fees. Directors could be forgiven for wishing they had bought more shares because only the chair, Will Whitehorn, appears to have invested more than his annual fees in Seraphim.

Returning to earth, a boardroom row continues between the activist American investor Saba Capital and Edinburgh Worldwide Ord (LSE:EWI), whose most valuable asset is a 15.9% allocation to Elon Musk’s Space Exploration Technologies or SpaceX.

Saba wants to sack the directors, who have some explaining to do about why they appear to have recently reduced their holding in SpaceX, ahead of its widely anticipated but not confirmed initial public offering (IPO).

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I paid 152p per EWI share in January last year, as reported here at that time, and they are currently cruising at 218p. A shareholders’ meeting has been called for 20 January and all of us should vote - for or against - the Saba proposals before Saturday 17 January, and beware that some investment platforms may require votes to be cast by 12 January.

Remember that failing to vote amounts to the same thing as demanding to be ignored. Even if peace breaks out in Ukraine, it does not look likely to reach EWI’s boardroom before Saba departs to seek arbitrage opportunities in the sky. Happy New Year!

Ian Cowie is a freelance contributor and not a direct employee of interactive investor.

Ian Cowie is a shareholder in Edinburgh Worldwide (EWI) and Seraphim Space Investment Trust (SSIT) as part of a globally diversified portfolio of investment trusts and other shares.