International Biotechnology Trust (IBT) is to expand its investments in unquoted companies under a partnership with Schroders Capital, the private markets arm of its fund manager Schroders.
The £258m investment trust has committed to invest £10m, around 4% of its assets, in Schroders Capital funds focused on innovative, early-stage biotech companies.
This is in addition to the 8.4% it already holds in two private equity funds run by its former manager SV Health Partners, which will remain outside the partnership.
IBT fund managers Ailsa Craig and Marek Poszepczynski transferred to Schroders from SV Health two years ago when it decided to focus on unquoted investments.
The trust will pay Schroders Capital an annual fee of 0.9% of net assets in the partnership plus £25,000 for administration costs, with the total capped at 0.25% of IBT’s net asset value. It already pays Schroders 0.7% a year for the management of its quoted assets plus a 10% outperformance fee. Schroders waived its fee for the first six months after its appointment in November 2023.
Schroders Capital, which this year embarked on the wind-down of its Global Innovation (INOV) trust, the former Woodford Patient Capital Trust, has over 25 years’ experience in healthcare and biotechnology and has committed over $4.3bn (£3.5bn) to nearly 700 investments worldwide.
The past five years have been hard for biotechnology funds with their assets weighed down by rising interest rates and periodic fears of drug price regulation in the US. However, IBT has beaten its peer group average with a 20.8% total shareholder return. In the past year, its returns have jumped 22% as low valuations have prompted a series of mergers and acquisitions.
Our view
James Carthew, head of investment company research at QuotedData, said: “I don’t have a problem with IBT’s decision to allocate a small proportion of the portfolio to unquoted biotech investments. Although, it would have been nice to see some numbers on Schroders Capital’s track record in this area. With biotech as out of favour as it is today – and hence less competition for deals and lower in-prices – the current vintage of unquoted investments may turn out to be some of the most profitable in years.”
