By James Thorneley 3i Bioscience is likely to experience some immediate NAV uplift as four companies...
By James Thorneley
3i Bioscience is likely to experience some immediate NAV uplift as four companies in its unquoted portfolio are close to IPOs.
The four companies are AtheroGenics, Inspire Pharmaceuticals, Pointshare and Ista Pharmaceuticals. The £250m trust also owns 8% of XTL Biopharmaceuticals, a company which was due to list at the end of May. XTL postponed the flotation due to the current market volatility. The trust's stake in XTL is valued at cost at £2.3m. Based on the indicative price of the flotation, the value of its holding would have risen to approximately £10m, equating to a 17.2p per share uplift.
Until the beginning of the year Rothschild Asset Management ran the trust. The trust decided to look for new managers last year when Rothschild withdrew from all biotechnology and healthcare investments. The appointment of 3i by the board to run the trust's portfolio will prove advantageous over the longer term, according to Carolyn Coke investment trust analyst at Deutsche Bank. She said: "Like its stable mates, 3i European Technology and 3i Smaller Quoted Companies, 3i Biosciences will have the right of first refusal on all biotechnology flotations from the main fund when 3i decides to sell. This is one of the key features and advantages that the trust has over its competitors."
The current portfolio consists of 49 quoted and 38 unquoted investments. The majority of unquoted holdings are valued at cost which partly explains unquoted assets only representing 20% of the portfolio in terms of value. 3i hopes to increase unquoted exposure to between 30-50%.
Under Rothschild's management the trust's quoted portfolio tended to be dominated by companies that had floated from the unquoted portfolio. Andrew Mussan, the new manager of the trust, is already reviewing this situation and Coke expects him to run a more actively managed portfolio. Other changes which are likely to be instigated include the reduction in the concentration of the portfolio. As at the end of March the top five stocks in the trust made up 34.5% of the portfolio.
In terms of geographic allocation some 485 of the portfolio is exposed to the US followed 18% in Europe with the balance invested in other parts of the world. 3i has intimated that asset allocation would shift away from the US and towards Europe, with the long term target of 50% invested in Europe. Coke said: "This strategy partly reflects the strength and breadth of 3i's network of resources across Europe compared with the US and partly reflects its view that the European biotechnology market is not only far less mature than the 'ex-growth' US market but much more favourably priced."
The trust currently stands on a 22% discount. This is not wide when compared with the past trading range of the trust. But it is still attractive when compared to its closest rivals Finsbury Life Science on a discount of 7.4% and International Biotechnology standing on a discount of 15.4%.
Irish border, resignations, market volatility and more
Revealed – successes across all 11 categories
Fidelity International multi-asset CIO James Bateman talks to Julian Marr about recent market volatility, portfolio positioning and his thoughts on the coming year
Follows Phil Young
‘Positive so far’