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Additional Material from December 2021 Newsletter

We had a lot of material for this month, and had to cut the following pieces from the final version of the newsletter.

Stifel upgraded Biopharma Credit (BPCR, US$0.95) on 30th November, saying “despite having a positive view of the manager, investment process and sector, we have remained cautious on BioPharma Credit due to its position concentration risk (largest investment is 25% of NAV). This has largely been philosophical as the largest borrower within the portfolio has enough cash to repay its loan in full. However, the fund has now slipped to its widest discount since the pandemic to 5%, and we believe it now offers an attractive entry point for a high quality fund. Cash drag remains a concern but has been a persistent theme since IPO and we believe it will be temporary. We upgrade to positive.”

Aberdeen Standard Asia Focus (AAS, 1455p) is finessing its mandate and structure in response to a strategy review by the board. Flavia Cheong is joining Hugh Young as joint manager, the management fee has been cut, the target dividend raised, a tender opportunity introduced if the trust underperforms over the next five years, and the shares are set to split on a five-for-one basis. The current market capitalisation ceiling of US$1.5bn for investee companies is also being removed to allow the managers to invest in larger markets more easily. These changes seem beneficial to us, and illustrate yet again how long-established investment trusts can adapt and evolve. Hugh Young commented “I remain as excited by the opportunities in Asia as I did when I first arrived in Singapore 30 years ago. I believe the changes announced today will strengthen both the investment proposition and underpin the future prospects of the company.” The shares seem decently valued on a discount of 14.5%, but the trust’s performance has not been particularly good for some time, so it does not seem an obvious choice in the sector until and unless these changes bear some fruit.

Seraphim Space Investment Trust (SSIT, 122.6p) launched very successfully in July and has been trading at a substantial premium to its initial NAV. It may need some time to grow into its share price, but it seems to be moving in the right direction now. Its first set of quarterly results to the end of September revealed an NAV up 6% to 104p, and a subsequent investment of US$12.5m in Astroscale, a business that transports and inspects satellites, extending their lives or removing them from orbit, takes the total number of investments to 18. The trust has agreed to make another two investments by the end of the year. SSIT seems to be developing as expected, and we think the shares will continue to be tightly held by investors willing to be patient yet eager to see how this sector might expand over the medium term. HOLD.

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