A quick update today on my alternative funds trading list. I’ve been running this for a couple of years now and featured it in a Citywire column for the first time on September 21^st of this year. You can see the article HERE.

Overall since September, there’s been a small but noticeable decline in the value of the portfolio – at the time I said the total return including dividends was about 33% whereas now it’s running at around 31%. Over the last three months, the average share price of these funds has declined by about 2% although that is slightly mitigated by the generous dividend payment son some of the funds.

I’m not suggesting any changes BUT I would highlight the recent price weakness of biotech funds and especially RTW Ventures which is down 14.5% in share price terms over the last three months and down -10% over the last month alone. I’ve noted before on this blog that the biotech sector as a whole has come off fairly aggressively in the last quarter. Back in mid-November I quoted Killik’s funds specialist Mick Gilligan :

“Biotechnology has comfortably outperformed the broader healthcare sector, which has in turn comfortably outperformed the wider market, over the last 10 years. Smaller biotechnology stocks have in turn outperformed the wider biotechnology sector over the same period. This makes sense when we consider the ability of biotechnology stocks to grow earnings faster than broader healthcare stocks and the scope for smaller more innovative biotech stocks to grow faster than larger more established players. However, this trend has reversed sharply in 2021 …..The Nasdaq Junior Biotech Index trades at Price-To-Book of 5.0x, broadly in line with the broader S&P 500’s 4.8x  despite superior long term growth prospects. This is close to the lowest absolute and relative valuation of this subsector during the short history since Bloomberg started tracking the data in mid-2020. The broader Nasdaq Biotechnology Index is currently trading at a 5-year low, relative to the S&P 500, on the same measure. Now is probably not a bad time to increase biotech exposure and the strongest long-term growth is likely to be in the smaller stocks.”

I’ve underlined the last sentence from Gilligan’s blog to highlight the main point – if you are, like me, long-term bullish biotech then now is not a bad time to think about topping up your holdings.

As for the two recent new entrants to the portfolio, the two Riverstone funds, I don’t have much new to say. Riverstone Energy is fundamentally a play on two catalysts: the first is that managers pivot successfully into clean energy and secondly that as a result, the yawning gap between NAV and the share price starts to tighten after years of terrible returns. Obviously, though there’s the great unknown which is the price of oil – which I still think is heading back to $100 but hey what do I know!

As for Riverstone Credit, this is a simpler investment proposition. It pays a generous income and those payments should compound over time, especially if the oil price stays elevated. Maybe the discount will narrow by a few percent but for the time being, I’m happy to take that 8.3% net yield.

Other than that, there are no other changes worth noting!