3i Infrastructure (3IN) said “macroeconomic volatility” weighed on a couple of its portfolio companies in the half year to 30 September but overall it continued to be supported by long-term mega trends in energy, transport and digital communications. The £3.8bn portfolio increased half-year earnings by 12.3% and posted a 4.5% investment return, down from 7.4% in the first half of last year. Total income and cash jumped to £195m from £121m enabling the interim dividend to be raised 6.3% to 7.15p per share, on track to deliver its full-year target. Strong performers included UK data communications provider FLAG, British landfill gas generator Infinis and Benelux renewable infrastructure operator Joulz, although 3IN remains cautious on traffic management equipment rental company SRL due to constraints on UK local authority spending. Net asset value per share rose to 416.4p from 405.2p. The 3.4%-yielding shares rose 4.5p to 404.5p putting 3IN on a 2.9% discount, the narrowest in its sector.
Richard Williams, senior analyst at QuotedData, said: “Another solid set of results puts 3IN on track to meet its annual target of 8% to 10%. The strength of its underlying portfolio was reflected in EBITDA growth of 12.3%, driven by digital infrastructure assets benefiting from growing demand for connectivity and data capacity. Following the disposal of TCR, 3IN is exceptionally well positioned to pursue new investments and support growth across its existing portfolio with £1.2bn of available liquidity. With such financial flexibility, it is well placed to deliver further value, although rising discount rates and weaker trading at a handful of portfolio companies presents some challenges.”
River UK Micro Cap (RMMC) has launched a 50% exit opportunity for shareholders but warned that should it receive sales requests above that level that would reduce its net assets from their current £93m to £42.5m, it will put forward proposals to wind up the company. The board is hopeful that the reappointment of Liontrust last month and the announcement that Anthony Cross and Hugh Sergeant will take on the portfolio at a reduced fee will persuade investors to hang on to shares trading at a 13% discount below net asset value and ensure the minimum size threshold is not breached. The company was previously managed by George Ensor and Mayan Uthayakumar who announced in July they were leaving to join Jupiter Asset Management at the end of the year. RMMC has a policy of holding compulsory share redemptions to ensure its assets do not exceed £100m. If the company continues after the exit, it will amend its realisation policy so that if a minimum of £10m is not returned to shareholders over three-year rolling periods, it will offer them a full cash exit.
QuotedData’s Richard Williams said: “These proposals seem a sensible response to such a significant change, allowing shareholders sceptical of the new management to exit much of their holding while those supportive of Liontrust to remain invested. However, the exit mechanism is not without complications. Shareholders will receive the proceeds realised from selling the underlying investments, less costs, rather than a guaranteed percentage of net asset value, and the process could take six to 12 months given the illiquidity of micro-cap shares. More significantly, if redemption requests exceed c.54.8% of the shares, the continuing company would fall below the board’s £42.5m minimum size threshold, triggering proposals for a full wind-up instead. This will be a test of shareholder support for the trust’s long-term strategy.”
Ruffer Investment Company (RICA) made a 1.3% investment return in October although the rise in net asset value was not reflected in the defensive multi-asset fund’s share price which dipped 0.2% to stand 4% below NAV. The fund’s value and interest rate-sensitive equities plus its recently increased bond allocation lifted the portfolio as global bond yields fell, and their prices rose. The benchmark US 10-year yield declined from a high of 5.36% on 5 October to 4.92% by month end, Ruffer said. However, this was partly offset by falls in the fund’s gold miners as the precious metal endured its worst month since 2008 despite the fall in yields that would traditionally be considered good for interest-free gold. Alexander Chartres, Jasmine Yeo and Ian Rees, managers of the £819m investment trust, said there was “considerable fundamental value” outside the narrow AI trades which started to unwind during the month as “neocloud” shares fell on fears of financing and future demand. “We added 3% to our collection of US stocks with a high free cash flow yield (c 8.5% versus the S&P 500 on c 3.5%) which would particularly profit in a broadening market rally. Further equity additions included US banks (beaten-up beneficiaries of more capital market activity if the AI train rolls on) and regulated utilities, which offer attractive inflation plus growth characteristics. We also added to US dollar exposure (now around 20%) to improve portfolio balance in the event of further energy-related escalation in the Gulf or a continuation of the US-centric AI-driven market dynamic.”
BioPharma Credit (BPCR), the high-yielding life sciences lender, is investing up to $50m in a $150m facility to fund a $145m acquisition by US biopharmaceutical company CorMedix, which is buying the assets of Heron Therapeutics. The first $25m tranche will be advanced after the transaction completes with a further $25m available up to 30 June 2028. The five-year loan will charge 5.75% interest over three-month SOFR subject to a 3.5% SOFR floor. CorMedix will also pay 1.5% per cent of each. BioPharma-V, a fund managed by BPCR’s manager Pharmakon Advisors, will provide the other $100m.
