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QD view – Space! – the not so final frontier

As an analyst in the investment companies sector, one of the exciting things is that asset managers are always dreaming up new ideas for funds to launch. I can go from looking at Asian smaller companies in the morning to European renewable energy in the afternoon. Already this year we have seen the launch of Taylor Maritime Investments – strengthening the ship leasing sector – and the creation of a brand new sub-sector in the form of digital infrastructure, which has already attracted over £1bn worth of backing from investors. Now, potentially, along comes the world’s first fund investing in space technology – Seraphim Space Investment Trust.

Seraphim is only just being rolled out onto the launch pad 😊. It announced its intention to float on 11 June and says it will publish a prospectus at some time over the coming weeks. We don’t know yet how much money it is looking for but it says it has a portfolio of seed assets worth £26m lined up and a further £70m worth behind that, so £100m sounds like about the right number.

The seed assets are currently held within a limited partnership vehicle which was launched in 2016 and has made investors returns of about 31% a year on average.

Launch costs are falling

The interesting stat in the announcement is that the cost of building and launching a satellite today is one/one hundredth of what it was in 2010. This opens up space to a much wider variety of commercial applications and echoes what has been seen in areas of technology where, once the cost of doing business falls, smaller and start-up companies can compete with much larger players, leading to a boom in innovation. If only that were true of the cost of launching an investment company, which I suspect has gone the other way as the size of prospectuses has grown.

I expect that the hype around this launch will be out of this world (groan), helped by the cachet that the trust’s chairman brings. Will Whitehorn was Richard Branson’s right-hand man for many years at Virgin and was, until 2010, President of Virgin Galactic. Unfortunately, that date underscores just how long it has taken that business to get off the ground (please stop – Ed).

The investment company structure is ideally suited to vehicles such as Seraphim which will hold a large proportion of its portfolio in unlisted assets.

Seraphim is one of a large number of new investment companies that are hoping to capture the imagination of UK investors. Liontrust ESG Trust is in the middle of its IPO process. Only just over a week ago we heard about the UK Residential REIT IPO – again taking us into new territory for the sector (although, as my colleague Richard wrote last week, Grainger and PRS REIT are similar-ish vehicles). We have added the prospectus to our website.

Market rumours are of almost a dozen new vehicles doing the rounds – although many will never get to the point of making a public announcement. We welcome the innovation in the sector and the vote of confidence in the UK closed-end fund industry that it implies.

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