The Telegraph thinks CVC Income and Growth is a Buy for income seekers, while This is Money explains why RTW Biotech Opportunities could go off like a rocket.

By Frank Buhagiar•02 Jul, 2024•

Questor: This Hargreaves Lansdown bidder’s loan fund is a ‘buy’ for income seekers

CVC Capital Partners, which floated on the stock market in April 2024, is part of a consortium that recently bid 1,140p a share for the retail investment platform Hargreaves Lansdown. The Telegraph’s Questor tips CVC Income and Growth (CVCG) as a buy for income seekers. For over the past five years, CVCG’s sterling shares, which currently yield 7.5%, have generated a total return of +43.4% compared to the average +19.7% generated by six of the fund’s peers – and that average includes CVCG. Similar story over ten years with the fund returning +84.9%.

The majority of this sector-leading return has come from the fund’s quarterly dividends which are covered by income and gains made from the loans it provides to credit-impaired companies. Now, ‘Credit-impaired companies’ may set a few alarm bells ringing but The Telegraph tipster points out that, “The portfolio is evenly split between ‘performing credit’ where companies are meeting their loan repayments as they repair their ratings, and ‘credit opportunities’ where fund managers Pieter Staelens and Mitchell Glynn see the ability to buy undervalued debt ahead of a refinancing, rating upgrade or acquisition.” As the fund managers explain, a poor credit rating doesn’t necessarily make a business bad.

The key is picking the right business and the right kind of debt. Almost three-quarters of the 128 loans the fund holds are ranked senior. So, CVCG is first in line for repayment in the event the loanee goes under. The loans are also secured against assets, thereby protecting the fund further, while borrowers pay a margin over base rate on their loans adding another layer of protection. All of which leads Questor to conclude “the shares continue to offer good value for income investors.”

RTW BIOTECH OPPORTUNITIES: Innovation ‘super-cycle’ could see biotech fund go off like a Rocket

So says This is Money after speaking to RTW Biotech Opportunities’ Roderick Wong. For in the 15 years since he established fund manager RTW, which today oversees £5.5 billion of investments, never has “Wong been more excited about the investment case for life sciences and in particular biotechnology than now.” Two reasons cited for Wong’s bullishness: the sector’s emergence from a three-year bear market; and signs that biotech is in the ‘early stages of an innovation super-cycle’ thanks to new technologies. While AI may be stealing the limelight when it comes to technology at present, Wong believes investors should be taking a closer look at biotech too.

And for those wanting to invest in the sector, the £522m RTW Biotech Opportunities Trust he manages offers a diverse portfolio of companies at all stages of the corporate life cycle from start-ups to established listed businesses. For Wong likes to hold companies for their full life cycles. In the article, Wong says “We like to be in from the start when a company is private. We do our due diligence and then work closely with them, maybe taking a seat on the board, and gaining confidence as we go along. Yet unlike venture capitalists, we don’t exit when the company goes public. Often, we will stick with our investment and reap bigger rewards as a result.”

And the approach has generated sector-leading results. RTW Biotech Opportunities’ shares have generated a +45% return since the fund’s October 2019 launch. The average return from the biotech and healthcare sector? +22%. And that outperformance was achieved despite biotech having to endure a three-year bear market. Question is, what would the fund’s performance look like during an “innovation super-cycle”?