The Covid numbers here in the UK continue to be absolutely terrible although there are a few tentative signs that the rate of growth might – only might – be starting to slow down. Which of course prompts the inevitable question, when might things start to improve ? Are we looking at weeks or months ? A first very tentative indicator comes in this study by economists : https://www.covid-arg.com/post/how-soon-to-see-the-vaccine-s-benefits
The chart below suggests that we are in for a very nasty two months through to early March but that by say the second week of March matters might begin improving as the vaccines begin to have an impact. But these numbers are for the UK, and my main worry is what happens if the UK variant – the Kent Strain – hits Europe. That could push places like Germany and Italy into a new crisis in late February. I’ve lost track of what wave that would be? Fingers crossed that doesn’t happen.
The fund no one has heard of – the Schiehallion Fund
In my next MoneyWeek fund’s article I mention a fund that has somehow avoided all detection – it’s called the Schiehallion Fund and in effect it’s a rival to the Chrysalis Fund and to a lesser extent Draper Esprit. In simple language, it’s a late-stage venture capital fund that looks to put money to work on businesses that are not far from their IPO. It’s listed on the specialist fund segment of the main market and as the note from Numis below makes clear, it’s very blue-chip institutional. It’s managed by the team at Baillie Gifford and is in effect a version of Scottish Mortgage and Edinburgh Worldwide but with all the public stuff left out. So, if you fancy having access to BGs fairly unique pipeline of disruptors, sans Tesla and Amazon, this is for you.
The fund is likely to be announcing a C shares issue fairly soon, probably looking to raise around $500m. It’s trading at a 12.4% premium to net asset value which is comparable with Chrysalis but above Draper Esprit (at 7%). Notable holdings include Graphcore and Space X.
I’ve also updated the table below which shows the top 15 holdings in the fund. The size of the issue has not been finalized but it is not expected that it would exceed $500m. A prospectus is expected to be published by the end of March 2021 and shares will start trading by the end of April.
Anyway, here’s the Numis notes on the fund:
“Schiehallion was launched with very little fanfare in March 2019, raising $477m (£361m) from a small group of institutional shareholders who are not traditionally holders of London-listed ICs, notably the State Board of Administration of Florida (40%), Royal Bank of Canada pension fund (10.0%), The Winnipeg Civic Employees’ Benefits Program (8.9%), Textron Inc. Master Trust (7.3%), NAV Canada Pension Plan (5.2%), with Baillie Gifford holding 10% (acting as manager for an underlying client).
The ordinary shares are currently trading at 141.5 US$ cents, albeit with very limited trading volume, representing a 12% premium to the 126.51 cents NAV at 31 December.
The fund makes long-term minority investments (<20% of share capital) in later stage private businesses that have the potential to become publically traded, with a value of at least $500m at the time of the initial investment. The focus is on companies with “transformational growth potential” that have scalable business models, with robust competitive advantages and strong management teams.
We believe it is an interesting approach and is run by Baillie Gifford who is a well-respected investor in this area, giving them access to dealflow. In addition, costs are significantly lower than a traditional private equity fund, with no performance fees and a base fee of 0.9% on net assets up to $650m, tapering down to 0.80% on assets up to $1.3bn, and 0.70% above $1.3bn.”
Top 15 Holdings Nov 2020
|Name||Business||Country||Nov-21||% of net assets|
|Stripe||Online payment platform||United States||37.47||6.50%|
|Scopely||Online gaming company||United States||32.79||5.60%|
|Tempus Labs Inc Series E Preferred||Oncological records aggregator and diagnostic testing provider||United States||30.34||5.20%|
|Warby Parker||Online & physical corrective eyewear||United States||30.45||5.20%|
|Space Exploration Technologies Corp||Rocket and spacecraft company||United States||23.234||4.00%|
|Affirm Holdings||Online provider of point of sale consumer finance||United States||22.14||3.80%|
|TransferWise Limited||Online money transfer service||United Kingdom||21.6||3.70%|
|Allbirds||Sustainable direct-to-consumer footwear||United States||20||3.50%|
|ByteDance Limited||Social media and news aggregation company||China||20||3.40%|
|Epic Games||Online gaming company||United States||20||3.40%|
|Tanium Inc||cyber security||United States||19.17||3.30%|
|Indigo Agriculture||Microbial seed treatments||United States||18.23||3.10%|
|Grail Inc||Life sciences||United States||17.36||3.00%|
|RigUp||Jobs market place for the energy sector||United States||14.25||2.50%|
|Cohesity Inc||Data management||United States||11.74||2.00%|
|Graphcore||AI procesors||United Kingdom||1.33||2.00%|
|Total unlisted securities||includes fixed interest||468.5||80.65%|
|Total cash and cash equivalents||112.23||19.35%|