Fund Focus: Investment trusts and strategic reviews
Posted on 4th July 2025 | By David Stevenson
In this month’s funds overview, we examine two out-of-favour UK-listed investment trusts in a state of flux.
Investment trusts and strategic reviews: Syncona and SDCL, funds in transition
The investment trust industry has been very busy in the last few months, inspired in part by US hedge fund Saba’s attempts to narrow chronic fund discounts. More generally, the investment company/trust sector has realised that there are too many small or underperforming funds, and that there’s a need for a strategic rethink. Sometimes that rethink ends up with a merger with another big fund or, in many cases, in a managed wind-down and return of capital. There have been so many strategic reviews, deals, and wind-downs that it’s sometimes easy to miss some interesting opportunities. I’ll concentrate on two in particular: Syncona, a listed venture capital life sciences fund, and SDCL Energy Efficiency Income Trust. Both have been trading at huge discounts, and both have decided to think more strategically about the future.
Let’s start with Syncona. This started off as a listed fund of hedge funds called BACITs that also raised money for research into cancer. Over time, the relationship with the Wellcome Foundation and its cancer research specialists blossomed, and BACITs decided to refocus. It was transformed into a UK-based, first-tier biotech venture capital firm with its own life sciences portfolio of early-stage assets, courtesy of the Wellcome Foundation. After an initial string of successful IPOs, the shares in the VC started to drift and have spent the last three years going nowhere, well, actually down to be more accurate. Some of this can be attributed to a persistent bear market in Biotech stocks, but a larger factor is that investors lost faith in its early-stage investment approach in private businesses, and frankly, some of its portfolio businesses underperformed. For more years than I can remember, Syncona kept pushing on with a strategy that was clearly not working with investors – the discount on the shares kept widening. Change was needed!
It took many months, but we finally have some resolution, not surprisingly, as the shares traded at a colossal discount of over 50% and have declined by 52% over the last three years. Last week, Syncona announced its full-year numbers and a strategy update. Here are some high/low lights, courtesy of the funds’ research team at Peel Hunt :
– a NAV decline of c.9.5% to £1,053m (vs. £1,239m in March 2023), or 170.9p per share (vs. 188.7p in FY24), with the decline in Autolus’ share price being the key driver
– Syncona reported a maturing portfolio of 14 companies, with 78.5% of strategic portfolio value now concentrated in eight clinical-stage and commercial companies, including two late-stage clinical and one with a marketed product
– An orderly realisation of portfolio assets, aiming to balance timely cash returns to shareholders with value maximisation. Syncona reiterated its confidence in the long-term opportunity of its strategy to “create and build companies leveraging world-class research.” The company is working closely with the board to explore the launch of a new fund for interested existing shareholders and prospective new investors. Syncona intends to continue to update the market on portfolio progress and stakeholder engagement outcomes in due course.
Peel Hunt analysts observe that the current discount “ significantly undervalues the portfolio (e.g. the current market cap is c.53% covered by cash alone)” while Numis analysts add that the
“proposed approach should give some comfort to listed fund investors that they will see cash come back as realisations occur, although this may take some years…. The board is also exploring accelerated realisations, which it notes “may include a sale of a small portion of its interests in certain of its portfolio companies at a modest implied premium to the current share price and at a discount to NAV”. If achieved, it would return the net proceeds and cash allocated to support further investment on the assets. The company is seeking to sell the assets to the new fund if it can raise additional capital.”
I suspect that the path to cash returns will be long and winding, but I think there might well be value in the shares, especially given the cash position and the chunky discount.
Next up, we have one of my favourite income ideas – SDCL Energy Efficiency. This invests in a range of energy efficiency and renewable assets, which are frankly rather dull, like CHP (community heat and power). The fund trades at a 42% discount with a covered yield of 12.3%. The fund has done many things right: it has sold assets at book value, bought shares (as has the manager), focused on reducing its debt (which is relatively high for many investors), and attempted to reach out to income-hungry private investors via different comms channels.
The fund also issued its annual update last week, and yet again, plenty of boxes were ticked. The managers released improved performance metrics, and the results were slightly better than I expected. Additionally, the management fee was reduced. That said, I’m still a little nervous about the high level of debt on the balance sheet and would prefer to see this brought down more aggressively. I’m also wary that the dividend is ‘only’ 1.0 to 1.1 times covered – I would feel a lot more confident if that was closer to 1.3 times covered.
Nevertheless, the big development came from the chair’s (Tony Roper) statement, which announced that it is “considering all strategic options to deliver value for all shareholders effectively and efficiently”, whilst also noting that it is “both in the context of the Company’s longer-term plan to drive value for shareholders and in a more wholesale and strategic manner”. The board plans to gather opinions of shareholders on possible outcomes over the coming weeks.
This is excellent news and could result in several outcomes, including a trade sale (possibly involving strategic investor General Atlantic), a take-private approach, or a more focused approach on reducing debt and selling assets. I stick with my long-term buy on the shares, and in the meantime, that generous dividend yield should help!
This trust has underperformed for years. Is it finally due a turnaround?
The manager has admitted mistakes but remains convinced of the strategy
Charles Cade
10 July 2025
Nvidia is a core holding of the Monks investment trust Credit: Dado Ruvic/Reuters
Questor is The Telegraph’s stock-picking column, helping you decode the markets and offering insights on where to invest.
How long should you persist with an underperforming fund? Should you sell and cut your losses, hold and wait for a turnaround, or even add to the holding? This is the scenario facing investors in Monks, a £2.4bn global investment trust managed by Baillie Gifford.
The reason Monks has lagged global equity markets in recent years is not hard to understand. Like other funds managed by Baillie Gifford, Monks has a clearly defined investment approach that prioritises long-term growth. This style performed well for many years, but has suffered since the period of low interest rates ended in 2021. Even when AI mania drove markets in 2023, Monks struggled to keep up with global markets as it was underweight the ‘Magnificent Seven’.
A sell-off in growth stocks following Trump’s Liberation Day in April this year was particularly painful, and although performance has picked up since, the net asset value (Nav) total return since the start of 2022 is just 4pc versus 33pc for its FTSE World benchmark.
Lead manager, Spencer Adair, acknowledges that Monks was slow to rebalance the portfolio in late 2021 when early-stage growth stocks represented more than half of the portfolio. In addition, some mistakes have been made in stock selection. For instance, a number of healthcare holdings have performed poorly over the past year, and a long-standing position in Moderna (vaccines) has been sold.
However, he points out that the portfolio is high quality, with superior margins, stronger cash flows and lower debt than global indices. The three-year annualised earnings growth forecast remains healthy at 12.5pc versus 8.6pc for the market, but the valuation premium on a forward price-to-earnings basis has decreased from 30pc in early 2022 to just 7pc.
A key focus is companies that power, build or benefit from AI, and these now represent 25pc of the portfolio. Core holdings include Nvidia, Microsoft and Meta, while recent additions include the semiconductor businesses Disco Corporation and Kokusai Electric. Another theme over the past year has been to find companies that are resilient in the face of unpredictable policymaking and rising global tariffs. New holdings include adaptable businesses, such as Uber, and companies focused on local markets, such as Nubank, a Brazilian online bank.
Despite being one of the largest investment trusts, Monks tends to have a relatively low profile, overshadowed by its stablemate, Scottish Mortgage, a FTSE 100 member with a market cap close to £12bn. The two funds share a similar philosophy, focused on long-term growth with no regard to index weightings. However, Monks has a more diversified portfolio, with the top 10 holdings representing 33pc of portfolio vs 44pc for Scottish Mortgage.
Monks also has a broader remit in terms of its exposure to growth companies, and the portfolio is balanced between three categories – Stalwarts, Rapid and Cyclical – with the aim of delivering more consistent returns in the long term. The Stalwarts (36pc by value) are well-established, profitable businesses with strong franchises, such as Microsoft and Amazon. Rapid (33pc) are earlier stage businesses with vast growth potential but are higher risk, such as Nvidia and DoorDash. Cyclical companies (31pc) are well managed and positioned to grow their earnings, but are more susceptible to macroeconomic and capital cycles, such as TSMC and Ryanair.
Another key difference from Scottish Mortgage is that Monks has a far lower exposure to unquoted investments of 3.1pc (including ByteDance, Epic Games and SpaceX) plus 2.7pc in Schiehallion, another Baillie Gifford-managed fund, this time investing in private companies. By comparison, Scottish Mortgage has over 25pc invested in unquoted stocks.
Questor last reviewed Monks in November 2022. With hindsight, the Hold recommendation proved to be wrong and investors would have been better selling out. The question now is whether the fortunes of growth investing are set to turn.
One drawback is that investors are not paid to wait, as Monks has a negligible yield. On the other hand, it has a low expense ratio of 0.43pc and investors are benefiting from an uplift to Nav as a result of buybacks, equivalent to 1.1pc over the past year. Having issued shares when Monks’ shares traded at a premium to Nav, it is encouraging that the board has committed to buying back shares, with the aim of keeping the discount in mid-single digits.
It is not clear that this is the time to add to US equity exposure, which represents almost 60pc of Monks’ portfolio. However, Questor believes Monks holds attraction as a way to harness the best ideas from Baillie Gifford through a diversified portfolio of growth stocks.
Since the Global Alpha team took over management in March 2015, the fund’s annualised Nav total return of 11.2pc is closely in line with global markets, despite the recent period of underperformance.
Questor says: hold Ticker: MNKS Latest share price: £13.06
Gore Street Energy Storage Fund PLC ex-dividend date Invesco Bond Income Plus Ltd ex-dividend date JPMorgan China Growth & Income PLC ex-dividend date Montanaro UK Smaller Cos Investment Trust PLC ex-dividend date NB Private Equity Partners Ltd ex-dividend date Schroder European Real Estate Investment Trust PLC ex-dividend date Schroder Oriental Income Fund Ltd ex-dividend date TwentyFour Income Fund Ltd ex-dividend date
Global X ETF ICAV – GLOBAL X SUPERDIVIDEND UCITS ETF USD DIS SDIP
Dividend Summary
The next Global X ETF ICAV – GLOBAL X SUPERDIVIDEND UCITS ETF USD DIS dividend is expected to go ex in 3 days and to be paid in 10 days. The previous Global X ETF ICAV – GLOBAL X SUPERDIVIDEND UCITS ETF USD DIS dividend was 7.65c and it went ex 18 days ago and it was paid 11 days ago. There are typically 12 dividends per year (excluding specials).
Current yield 11.7% which when re-invested back into your Snowball will earn extra interest each month.
The Snowball’s position is currently in profit £948.00, although according to market wisdom you shouldn’t buy high yielders.
Of the profit dividends account for £747.42, which have been re-invested back into the snowball earning more dividends.
The conundrum will be whether to take a capital gain currently £201.00, which considering the high yield it isn’t worth booking, yet. Of course it may disappear like snow on a summer’s day and solve the conundrum for me.
Supermarket Income REIT plc (LSE: SUPR), announces the acquisition of a Tesco omnichannel supermarket in Ashford, Kent, for a total purchase price of £54.1 million (excluding acquisition costs), reflecting an attractive net initial yield of 7.0%[1] (the “Acquisition”).
Tesco, Ashford acquisition
The Acquisition of this top performing food store comprises a 93,000 sq ft gross internal area omnichannel supermarket and a petrol filling station, situated on an 8.2 acre site. Tesco has traded from the site for over 30 years and uses the store as an online fulfilment hub with 14 home delivery vans, as well as offering Click & Collect services. The store is being acquired with an unexpired lease term of nine years with annual RPI-linked rent reviews (subject to a 5% cap and a 0% floor).
The Company believes that current market conditions provide an attractive buying opportunity, at an inflection point in the real estate cycle where supermarket property valuations are at multi-year lows and long lease inflation linked assets can be acquired at accretive yields.
This Acquisition represents the first transaction for the Company as it redeploys the proceeds arising from the formation of its recently announced strategic joint venture with funds managed by Blue Owl Capital into a pipeline of attractive investment opportunities. The Company sees a number of complementary routes to help drive growth, scale and liquidity whilst maintaining sector focus. This may include increasing the tenant weighting to operators for which the Company currently has limited or no exposure to, and across a broader range of store formats, whilst maintaining the quality of the Company’s income profile. The Company is pursuing earnings enhancing acquisitions with the strategic objective of delivering a growing and fully covered dividend over the long term.
Rob Abraham, CEO of Supermarket Income REIT, commented:
“I’m very pleased that we have begun redeploying the proceeds arising from our recent joint venture, acquiring this top trading Tesco supermarket at an attractive price, which will make a material contribution to our earnings from day one. The team continues to work hard to execute on a number of further pipeline opportunities as it focusses on scaling the business whilst delivering sustainable earnings growth for our shareholders.”
