Past performance is not a guide to future performance.
The Trust will seek to achieve its objective by investing in a diversified portfolio of companies which may be quoted or unquoted and whose shares are considered to have good growth prospects, with experienced management and strong potential upside through the development and/or commercialisation of a pharmaceutical product, device or enabling technology.
Investments may also be made in related sectors such as medical devices and healthcare services.
While the Trust's portfolio is held as one pool of assets, for operational purposes there is a quoted portfolio and an unquoted portfolio. The quoted portfolio makes up the majority of the Trust’s asset pool and comprises investments made into listed companies. The unquoted portfolio may comprise investments made into unquoted companies and into funds not quoted on a stock exchange, including venture capital funds. This may include funds managed by the Investment Manager and/or members of its group.
The portfolio is diversified by geography, industry sub-sector and investment size with no single investment in a company accounting for more than 15% of the portfolio at the time of investment.
The portfolio is split between large, mid and small capitalisation companies, primarily quoted on stock exchanges in North America, where the most established and commercial biotech and other life sciences companies and companies operating in related sectors are based, though investments can also be made in Europe, Asia and Australia.
The Trust's Investment Managers apply a rigorous bottom up approach to the investment selection process, with a top down overlay to ensure diversification. Investments are purchased with the intention of achieving long-term capital growth. However, portfolio composition is adjusted on a regular basis in line with the Trust's risk mitigation strategy.
Investments are selected after a thorough, multi-stage due diligence process which includes idea generation through the attendance of conferences and one-on-one meetings, analysis of a company's financial stability and liquidity situation as well as a review of a company's executive management's experience and expertise. The investment manager seeks out companies that address an unmet medical need, have a single/wholly owned asset, or own a monopoly position in its market. Detailed financial models are created by the team to assess the reasonableness of a company's valuation with the aim to seek out well financed, cash generating, attractively valued investment opportunities.
The Trust observes the following investment restrictions:
By investing in unquoted companies, the Trust allows investors access to the full spectrum of the healthcare & biotechnology sector and allows investor exposure to otherwise inaccessible investments, especially venture funds. The unquoted portfolio provides additional diversification to the Trust’s portfolio and reduces volatility in the Trust’s net asset value during periods of extreme market volatility.
In the ordinary course of business, the Trust’s unquoted portfolio is revalued once a quarter. The Fund Manager continually monitors the business and economic activities of each unquoted holding and will perform an intra-period revaluation if required.
A minor holding of £110k was written down to zero based on negative data during the six months ended 29 February 2020.
In addition to the benefits received by investing in an unquoted portfolio, investing through a venture fund grants investors access to the skills and expertise of the venture fund’s Managers. Investors will also have access to a broader spectrum of investments per unit of invested capital.
As at 29 February 2020, the Trust’s investment in SV Fund VI amounted to £19.9 million, which represented 8.2% of the Trust’s net asset value.
The Trust made a commitment of $30 million to the fund on 19 October 2016, equivalent to 7.5% of the fund’s total commitments at that date, which will be drawn down over the life of the fund. The amount invested as at 29 February 2020 represented 71.3% of the $30million committed capital. The Board expects the unquoted portfolio (including both SV Fund VI and directly-held unquoted holdings) to remain within the guideline range of 5-15% of total net asset value at date of investment.
In 2016, The Trust’s Board took a decision to no longer make direct investments into new unquoted holdings. Instead, to allow a concentrated holding with broader investment exposure and diversification, the Trust continues to access unquoted holdings by investing directly in a venture capital fund, SV Fund VI.