Baron Rothschild once advocated investing when there was ‘blood on the streets’. It may be a gruesome metaphor, but there is wisdom in buying investments when they appear a little scary. It suggests the risks are well understood, and the price may be appealing. This Halloween, we look at three investment trusts that may seem spooky on the outside, but where fears may have been overdone.

Final frontier: Seraphim Space

Mark Boggett admits that investing in space can seem risky, with its associations of rockets, lunar landings, space travel or trips to Mars. Space is a new frontier, and strictly for the adventurous. Yet the Seraphim investment trust he manages doesn’t invest in rockets, space travel, or anything to do with the moon or Mars. It invests in satellites, where the technology and economic case are already well-established.

He says: “People use satellites every day of the week. You’re driving your car, you’re finding that address, booking a lunch appointment. There isn’t anything you do that doesn’t bring you into contact with satellites.” He points to research from the UK Space Agency that shows around 18% of UK GDP is related directly or indirectly to the space market. “GPS, for example, has generated tens of billions of dollars of enterprise value. Entire industries have been overturned because of GPS – the taxi industry, for example.”

Among the trust’s investments is Iceye, which is creating the next generation GPS using radar rather than cameras. That means collecting hundreds of pieces of information about earth rather than just longitude, latitude and time. It collects this data using small satellites, each of which has a radar. Radar can see through cloud, and operate at night, which gives it a far richer and more timely data set. It has been used by the Ukrainians during the war, to look beyond their borders and diagnose threats, but also has uses in autonomous transport, food security or smart cities.

The trust also holds AST Space Mobile, taking it through to IPO and beyond. This company develops cell towers in space. “This can connect to mobile phones, without having any hardware or software updates. They have relationships with Vodafone, Verizon or AT&T. When you can’t be served by terrestrial cell towers, you automatically roam onto the space towers, but you won’t notice any difference. You can get reception up a mountain, on the sea, in an aeroplane.”

He says SpaceX has brought down the cost of sending satellites into space, which has been a game changer for the sector. It used to cost over $80,000 per kilo and now it is $1,000. In 2024, there was a launch every 34 hours. “It is now low cost and highly available. Entrepreneurs are now saying that it’s so cheap and so widely available, what companies are we going to develop that are going to address some of the big challenges for life on earth?”

The AI conundrum: Manchester & London

It would be a stretch to say that investors have found technology scary in recent years, but they are certainly finding it more scary today. After a lengthy bull run, valuations look high and parallels have been made with the dotcom bubble of the late 1990s. There have been concerns that AI will not deliver on the vast investment pumped into it, with some even suggesting that progress on large language models is stalling.

Mark Sheppard, manager on the tech-focused Manchester & London investment trust, is robust in his defence of the sector: “It’s a barrage of naysaying noise,” he says of the recent criticism. His view is that the economics of ‘inference’ – the process by which models earn their keep – is poorly understood. “Let’s begin by calculating the profit from inference on one million tokens – a token being the very base unit in an answer you get on ChatGPT; that is, a word or part of a word. The revenue is the amount a cloud provider or AI application service earns for processing one million units of model output.

“The cost is the total expense of generating the same amount of units – primarily the capex on those mighty GPU processors plus the operating costs – opex – such as power and cooling. Goldman Sachs recently estimated that OpenAI is only marginally profitable on inference, earning roughly $4.29/million units while incurring around $3.36 in total costs for the same volume.”

This may seem worrying, he admits, but it ignores the pace of hardware improvement. “Each new GPU generation delivers multiple-fold gains in throughput and efficiency, driving the cost per token sharply lower. While it’s true that Nvidia’s earlier models likely cost around $3/1m to run, the new systems have costs as low as $0.14/1m. The implication is clear: inference economics are improving logarithmically, not deteriorating,” he says.

He says the revenue side of the equation also stacks up, but adds “in our view, focusing on how many consumers pay for AI entirely misses the point. Products that create real value always find a path to monetisation. Google and Facebook demonstrated that revenue doesn’t always depend on subscriptions and there’s no reason why AI should be different.” Enterprise model pricing has declined but remains resilient, but this could be a catalyst for broader adoption.

Looked at from that point of view, valuations are not as scary as they might initially appear. Nevertheless, the trust holds some concentrated positions. Nvidia is his largest holding, at 41%, with Microsoft at 23%. It is currently on a discount of 18%, so if investors are sold on the AI trend, it is a cheaper way to get access.

Renewable energy threats: SDCL Efficiency Income

Renewable energy shouldn’t be a scary place. The move to renewable energy is a ‘mega trend’ – a multi-decade shift, supporting by governments and businesses across the world. Yet, it has been a tough place for investors in recent years, with the discounts on renewable energy infrastructure trusts widening out.

The spooky bit has been the reversal of US support for renewable energy options. The Trump administration has backed away from investment in clean energy, with $8bn of grants cancelled across multiple states[1]. SDCL Efficiency Income Trust has been particularly hard hit by deteriorating sentiment towards the sector, seemingly due to its higher weighting in the US (70%).[2] It has a discount to NAV of 37%, with a dividend yield of over 11%.

Yet the underlying investments don’t look scary at all. Tamsin Jordan, director at Sustainable Development Capital LLP, which manages the trust, says: “We operate and develop in a section of the energy transition’s least-known and invested-in areas. By reducing the use of energy, we thereby reduce the carbon emissions as well as reducing cost for customers. It means that everything we do is commercially attractive.”

The portfolio is diversified across 10 countries, 50,000 end customers, and 40 different projects. The group has long-term contracted revenues across a diversified portfolio. Jordan says sentiment has been hit by a combination of the jump in discount rates in 2022, the problems over cost disclosures, consolidation among wealth managers and the trust’s perceived complexity: “We are unusual. That’s been our strength and our downfall. In reality, we are offering much more commercial solutions to our customers, but we appear more complicated than our renewable infrastructure peers.”

The trust is starting to see improvements. The discount has narrowed on the successful refinancing of a revolving credit facility. It has made a number of disposals at good valuations, which went some way to prove the underlying NAV. “We’ve also managed to bring in new shareholders, both US institutions and a significant number of UK retail investors. This additional liquidity has helped our share price in recent months.”

The fund is concentrated – 75-80% of the NAV is in five big portfolio investments in the US and Europe. Investments include Onyx, its largest holding, which is focused on solar panel installation for businesses, and Primary Energy, which takes waste gas from blast furnaces and recycles it to create electricity and steam, which is then sold back to the steel mills.

Jordan admits that there is a Trump effect, she adds: “There is a public sentiment impact, but customer demand at Onyx is driven by the fact that the energy is significantly cheaper and more reliable than the grid. Our customers aren’t working with us because it’s clean energy, they’re working with us because it’s commercially appealing energy.” There is an impact from the withdrawal of subsidies, but that is more than reflected in underlying valuations.

With that in mind, these areas can look spooky on the outside, but some of the fears may be overblown, or at least largely factored into pricing. It may be worth looking at something a little scary this Halloween.

[1] https://www.theguardian.com/us-news/2025/oct/04/trump-clean-energy-cuts-democrat-states

[2] https://www.seitplc.com/wp-content/uploads/2025/10/02_SEEIT_Factsheet_Jul25_Final.pdf