The Schiehallion Fund has published results for the year ended 31 January 2022. The ordinary share price and net asset value per ordinary share returned 17.8% and 7.6%, respectively. From their admission to trading on 26 April 2021 to 31 January 2022, the C share price and net asset value return was -4.8% and -2.0%, respectively. There is no dividend – the revenue returns on each class were negative. The two pools are not yet merged. When the C shares were issued in April 2021, the board said it would be reasonable to expect that the C share proceeds would be two-thirds invested within two years. As at 31 January 2022, approximately 60% of C share proceeds had been invested in 20 companies. Once the C shares have converted into ordinary shares, the company may seek to raise additional capital, by way of a further issue of C shares.
During the year, the company issued 20.08m ordinary shares at an average premium of about 27.2%, raising $41.36m.
Extract from the manager’s report
“The recent market turbulence is the first for Schiehallion, but it will not be the last. In periods of fear, as in periods of euphoria, the most dangerous thing an investment manager can do is deviate from their philosophy and process. Consistency is what is needed.
During the year, five of our holdings, Wise, Allbirds, Warby Parker, Oscar Health and Zymergen entered the public markets. In addition, Grail was taken over by Illumina, also a public company.
In the recent market sell-off we have seen the quoted values of many of our public investments decline meaningfully. Affirm, which has been the largest contributor to performance since inception, was the biggest detractor from performance of the ordinary shares over the year to the end of January. Despite its weak share price performance, operationally, Affirm continues to perform well and has recently signed a partnership with Amazon and is seeing significant traction through their Shopify integration. Oscar Health and Zymergen share prices also detracted from performance.
Most of our private company holdings continue to grow rapidly, and saw their valuations rise during 2021. However, in line with our valuation policy, we reduced the carrying value of many of our private holdings in January as valuations of comparable public companies fell. When this happens, we ask ourselves whether anything fundamental has changed. Does the investment case still hold up and is significant upside still available? If the answer to both questions is yes, then we recognise these movements for what they are – noise, not signal. To borrow a metaphor from Benjamin Graham, the market’s voting machine might be gyrating wildly, but our focus remains on operating and honing our weighing machine.”
[The announcement is frustratingly light in detail on the individual holdings. The manager highlights the over-exuberance that characterised Schiehallion’s part of the market last year. As I wrote in an article for Citywire published recently, I had hoped to hear how US/Ukrainian company Grammarly is coping with the effect of the war, and what the manager’s views are on the future of Wise (whose shares have fallen sharply in recent weeks), for example. I get the importance of focusing on the long term, but some inkling of how things are going with the company’s major investments would be welcome. Maybe it will be in the report when it is published.]
MNTN : Schiehallion focused on the long term picture