Ethical investing

ii ACE 40 investments:
Syncona IT

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Asset Group Asset Sub-Group Investment Category
Alternatives Specialist Adventurous
 

WHY WE RECOMMEND IT

Focus on life sciences: Syncona is focused on founding, building and funding companies in innovative areas of science and is an established leader in cell and gene therapies.

Experienced and well-resourced investment team: Syncona is managed by a team with deep scientific and commercial expertise.

Solid performance: Over the longer term, the trust’s shares have performed well, but since its transformation to a fully-fledged life sciences company in December 2016, the net asset value has risen strongly.

 

ETHICAL CRITERIA

ii ACE ethical style: Embraces. This means the investment trust adopts a targeted or proactive approach to ethical investing, in an effort to make a positive impact and/or environmental outcomes.

Fund EcoMarket category: Social Themed. These funds typically focus on ‘people issues’ (such as employment and basic necessities of life). Social themed fund managers focus significantly on societal benefits when analysing companies for investment.

How the investment trust is managed: The company is focused on investing in and building global leaders in life science. Its vision is to “deliver transformational treatments to patients in truly innovative areas of healthcare while generating superior returns for shareholders”.

 

THE RISKS

Unquoted holdings: The investment trust has a large proportion of assets under management in entities that are not listed on public exchanges.

Portfolio concentration: The trust aims to have a portfolio of 15-20 companies with strategic ownership positions.

Currency: Because some of the investee companies are subsequently listed on overseas exchanges, performance may be significantly affected by changes in exchange rates.

Net asset value: Shares of the investment trust may trade at a significant discount or a premium to net asset value for a variety of reasons, including the valuation of unlisted companies and market conditions. On a sale you could realise less than the net asset value.

Above average charges: This specialist investment trust levies annual ongoing charges of 1.4%. While the trust has high ongoing charges relative to other funds in its peer group, we believe the trust offers investors value for money when considering the expertise of the managers and its specialist nature.

 

TENDS TO TRADE ON A PREMIUM

It is important for investors to be aware that Syncona is trading on a premium to its net asset value (NAV). When Syncona was added to the ACE 40 in October 2019, it was trading on a premium of around 20%. It is currently (as at 28 January 2021) trading on a premium of around 30%.

While in most cases it is not prudent to buy an investment trust on such a high premium, we feel that Syncona is a special case given the nature of its portfolio in backing early stage companies that are hard to value. On a long term view we regard the value of the underlying investments as conservative, which is why we are happy to recommend on the trust on such a high premium.

We always try to establish the underlying reasons why a trust is trading at large premiums (or discounts). In some cases large premiums (or discounts) may be caused by short-term investor sentiment, but they can also be a permanent feature for certain trusts such as Syncona.

 

Information and data compiled January 2021.

To learn about investment trusts read our beginner’s guide

Our explainer video runs through investment trust discounts and premiums

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Risk warnings

The information we provide in the ACE investments list does not constitute a "personal recommendation". You should ensure that any investment decisions you make are suitable for your personal circumstances and that the ethical style of the investment reflects your personal beliefs.

Past performance of the underlying constituents is not a guarantee of future performance. Remember, the value of investments, and any income from them, can fall as well as rise so you could get back less than you invest.

Annual performance can be found on the factsheet of each fund, trust or ETF. Simply click on the asset’s name and then the performance tab.

If you are unsure about the suitability of a particular investment or think that you need a personal recommendation, you should speak to a suitably qualified financial advisor.

Any changes to the ii ACE investments list and the rationale behind those decisions will be communicated through the Quarterly Investment Outlook.

Details of all recommendations issued by ii during the previous 12 month period can be found here.

ii adheres to a strict code of conduct. Members of ii staff may hold shares in companies mentioned in the ii ACE investments list, which could create a conflict of interest. Any member of staff intending to complete some research about any financial instrument in which they have an interest are required to disclose such interest to ii. We will at all times consider whether such interest impairs the objectivity of the recommendation.

In addition, staff involved in the production of this ii ACE list are subject to a personal account dealing restriction. This prevents them from placing a transaction in the specified instrument(s) for five working days before and after an investment is included or amended and made public within the list. This is to avoid personal interests conflicting with the interests of the recipients of this ii ACE investments list.