Investment trust insider on annual redemption opportunities – James Carthew: Annual redemptions bring more problems than solutions
Yearly redemption opportunities turn trusts into cash cows and don’t even keep discounts narrow, as Bellevue Healthcare has learnt.
This week’s focus is on annual redemption opportunities. I made it clear earlier this month, when discussing the demise of Gulf Investment Fund (GIF) – which just announced another year of benchmark-beating returns – that I strongly disagreed with the 100% exit opportunities it had been offering shareholders on a six-monthly basis. So, you can probably guess where this is going.
The biotech and healthcare sector is one that suffers from fairly extreme swings in sentiment. There was something of a bubble in biotech back in 2020, as the fight against Covid highlighted some of the incredible advances being made in medicine. However, as interest rates started to rise, cash-burning, unprofitable companies, with unproven technology sold off sharply.
Now, the listed biotech sector is recovering once again. Biotech Growth Trust (BIOG) has been one of my fastest-rising holdings over the past 12 months (up 42% in net asset value (NAV) terms, and 38% in share price terms, according to Morningstar). However, Syncona (SYNC) – which has more of a bias to unlisted companies, and which I also hold – continues to disappoint and languishes on a near-43% discount.
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