Latest news with #FundOfTheWeek
Telegraph
28-02-2025
- Business
- Telegraph
‘I don't care if you love or hate Elon Musk – he's the entrepreneur of our generation'
Fund Of The Week quizzes fund managers about how they're investing your money. If you'd like to suggest which funds you want to hear about and pitch your questions to the managers, sign up to the Investor Newsletter here for more details. Britain's sleepy and discounted investment trust industry received an unwelcome wake-up call in December when Saba Capital Management, the American hedge fund, forced general meetings at seven investment trusts after building significant stakes. Their intention was to take over the trusts after ousting the boards and managers. Edinburgh Worldwide, which invests in public and private growth companies, featured among Saba's initial seven targets. On Valentine's Day, close to 64pc of votes cast by its shareholders rejected Saba's proposals, an outcome that marked the hedge fund's seventh straight defeat. Douglas Brodie, Edinburgh Worldwide's manager describes these votes as a 'test of shareholder democracy'. Nevertheless, he acknowledges the challenges associated with having a large shareholder who is actively disengaged with the investment strategy and not aligned with other shareholders. Mr Brodie, a backer of SpaceX, also tells Telegraph Money why Elon Musk's new role in the administration of Donald Trump, the American president, is not a source of concern. Shares in Edinburgh Worldwide are up by 22pc over the past 12 months, which compares to the average 11pc gain achieved by rival global smaller companies trusts. However, over five years, the trust's share price has fallen 12pc, while its competitors have risen by 25pc. Edinburgh Worldwide, which is also managed by Svetlana Viteva and Luke Ward, trades at a 5pc discount to its assets. How do you invest? We have long been intrigued by the role of technology and the scientific drivers of change. With this in mind, we seek to find entrepreneurial, innovative companies when they are young, investing when they are below the radar of mainstream global investors. We try to identify these special businesses and hold them as they grow and thrive. How are you feeling after the recent shareholder vote to fend off Saba? I think the whole process for us and the other trusts was a real test of shareholder democracy. It was pleasing to see the results and engagement among the shareholder base. We thought it was a hugely important topic for shareholders to engage with because the proposition that Saba put before them was a radical change in the investment proposition that came with a lot of conflicts and challenges, and a clear change of remit. At Edinburgh Worldwide, we try to find the most interesting, relevant, long-term businesses that are trying to drive change and innovate. By comparison, the tentative narrative Saba put out was about building a strategy around arbitrage by trading investment trust discounts. It is the classic contradiction of long-term investment versus trading. Ordinarily, those worlds don't meet that often, but they did in this case. It is encouraging to see shareholders who bought into our long-term investment strategy backing that strategy. Do you suspect there could be further proposals from Saba? If so, what shape could they take? I have no insight on that. However, I think it is odd that the largest shareholder in Edinburgh Worldwide is actively disengaged with the strategy. We have offered to meet Saba but they show no interest in meeting. I don't know what their strategy is – to some extent I don't think they know. I'm not being overly critical here, but they seem to be building it as they go. Given Saba has a 25pc stake in the trust, are you and the board thinking about how they will offload that? That is more of a question for the board than for me. The board is willing to return up to £130m to shareholders during the course of the year, I think it is front and centre for them. We have a shareholder who is not aligned with the strategy or the other shareholders. The vote in favour of Edinburgh Worldwide's strategy, as was the case for the other trusts, is telling in that regard. Why did Edinburgh Worldwide's performance struggle between 2021 and 2024? We have come through a difficult period for a lot of growth and smaller company investors. If you consider our particular slant on smaller company investing, where in some cases we back high-potential but unproven businesses, it has been very challenging. These are businesses that are all about the future, and all of a sudden, the stock market's lens condensed to the here and now. Market volatility was also a lot higher than we would have liked or expected. Performance clearly disappointed over that period. It gave us an opportunity to pause and think about the long-term positioning of the fund. We have a spectrum of company maturities in the portfolio – some are very early high potential businesses which have a lot to prove, some are proving themselves and delivering, while others are performing at scale and beginning to dominate their markets. We are now more conscious about the spread of companies in the portfolio. Also, we have better rules and discipline to avoid country or industry skews that may have crept in. We have been through a process of kicking the tyres and have deployed new processes. How do you view Mr Musk's role in President Trump's administration? We have invested in Elon-backed companies since 2013. I believe he is the entrepreneur of his generation. Throughout that time, he has worn multiple hats and has a phenomenal bandwidth for doing that. So the political aspect to Mr Musk's new role isn't a concern? I don't ask the management teams of the companies I invest in to fill out a political questionnaire so I can form views around their political opinions. I am backing them to build businesses. Elon has a track record that is second to none of doing that. What is your typical success rate picking stocks? If you look at our long-term returns, about 20pc of our names deliver the bulk. Typically, you also have a pool of companies that wash their face and do okay and a pool of companies that underperform relative to your hypothesis. Some of the successful companies can become quite big in the context of the fund, so it is a strategy that benefits from 'investment asymmetry'. We get into these businesses on the ground floor, when they have huge runways for growth, but they then have to execute their plans well. Axon Enterprises, which makes taser devices and body-worn cameras, is a good example. It has been a phenomenal investment for us. The management team has executed brilliantly and it continues to redefine its end-markets. What has been your best investment? SpaceX is up in the order of more than 600pc over the past five years. It is rare you come across a company that has redefined what is possible in its industry – the opportunities are exploding in front of them. If you think about how the world has evolved over the last few years, people put extra importance on geopolitical tension points. You probably have to view SpaceX and Starlink (SpaceX's satellite network and telecommunications business) as the most geopolitically important assets out there if they have the advantage we think they do, versus others for getting objects into orbit and controlling low earth orbit geostationary satellites. When do you think SpaceX will go public? Elon and SpaceX have said Starlink is cashflow positive. Most companies list when they need access to capital, but it isn't obvious that SpaceX needs capital. Elon and the board will list the business when they believe it is a natural point to do that. What has been your worst investment? Online supermarket, Ocado, is down roughly 70pc over five years. If you go back to the start of that five-year period, the industry was beginning to properly embrace e-commerce and scalable ways of doing that. Ocado did very well in that initial period and was a Covid beneficiary, signing multiple partnership deals around the world. Demand is still very much there at the consumer level, but from Ocado's perspective, it is about tailoring their offering for individual partners whose starting points and requirements are different. The lesson we learned is that Ocado isn't a 'plug and play' solution for everyone. The UK is a very interesting test case because we think the returns are there, but you have to build to fit the opportunity. And the opportunity is different in every territory you go to.
Telegraph
19-02-2025
- Business
- Telegraph
‘We made 434pc on one stock – now we're hunting for the next Ozempic'
Fund Of The Week quizzes fund managers about how they're investing your money. If you'd like to suggest which funds you want to hear about and pitch your questions to the managers, sign up to the Investor Newsletter here for more details. Healthcare investors have had a disastrous time of late. Over the past five years, the average biotech and healthcare investment trust has fallen 13pc, losing money during a period in which the FTSE 100 and S&P 500 hit record highs. However, in Polar Capital Global Healthcare trust, investors will find an extreme outlier – over the same period, the vehicle has offered a total return of 60pc. Its manager, Gareth Powell, sits down with Telegraph Money to explain what has worked for the team and why it will continue to grow. He discusses the difficulties the new American health secretary will bring for the sector, and explores why his team is looking beyond incumbents Novo Nordisk and Eli Lilly for the next generation of weight-loss drugs. Polar Capital Global Healthcare, which is co-managed by James Douglas, currently trades at a 3pc discount to its assets. How do you invest? We try to find aspects of healthcare stocks that aren't widely understood. Essentially, we look for inefficiencies in these stocks – we try to go into greater detail and we add value with financial analysis and a focus on valuation to find the best ideas. What does president Donald Trump mean for American healthcare stocks? Normally as an investor in healthcare, you are more scared about a Democrat president or big wins in Congress for Democrats because they favour greater government involvement, which means less of a free market. You would have thought we would be jumping up and down with glee about the election result. However, Mr Trump announced his nomination for health secretary as Robert F Kennedy Jr, who doesn't have any expertise in the space and has lots of conspiracy theory-driven views on healthcare. He has caused a huge degree of uncertainty for the sector. Mr Trump is very focused on the government spending less money, so we expect to see an impact on government-covered healthcare, particularly Medicaid, the health insurance exchanges and healthcare providers. There are stocks in the service sector that could potentially get hurt and stocks exposed to vaccines will also be impacted by Mr Kennedy in the role. Overall, I am optimistic on the healthcare sector, given how cheap and out of favour it is. The outcomes are never as bad as people fear at the time. How do you think the weight-loss drug craze will play out? There was initially a lot of enthusiasm. Prescription trends were very strong and the stocks moved in line with that. However, they have moderated over the last few months due to negative news flow and poor sentiment towards healthcare stocks. There is now a huge amount of negativity, so these stocks warrant a fresh look. I think what's critical in the short term is improving prescription trends – the market opportunity is still there. These drugs are very powerful, but there are lots of moving parts in the short to medium term, like 'reimbursement access' (whether the medication is covered or reimbursed by health insurers), and how long patients use these drugs while experiencing side effects. Novo Nordisk and Eli Lilly are investing heavily, trying to develop other candidates, but we are not just focused on Novo and Lilly – there are others coming. Development will focus on whether the drugs are administered orally or via injection, and whether the time between doses can be pushed out. Also, can you have different mechanisms with better side effects? Is artificial intelligence (AI) going to shake up healthcare? Investors are buying stocks like chipmaker Nvidia, which provides the hardware for AI. This is how these things start with a tech cycle. The second stage will be about making AI more user-friendly and available in different formats. I think healthcare will be a beneficiary during the third stage and will use AI to become more efficient. For example, AI could be used in image analysis. When patients go for scans, AI-driven capability can read images rather than relying on doctors. There is a real opportunity there and I think this is just the start. AI could also be used to enrol clinical trials faster by accessing patient records and quickly identifying patients over a wide geographic area. This would be a game changer. People suggest new drugs will come from AI. I think it can help the process, but what I have seen in 25 years of investing in healthcare is that big innovations for diseases come through the identification of a new target. AI is based on historical data – if you are looking for a new target, you still need to be doing the biology. What has been your best investment? Argenx, an immunology company that focuses on treatments for severe autoimmune diseases, is up 434pc over the past five years. It successfully developed a product called Vyvgart for a rare neurological condition, servicing a big unmet need. It also recently got an 'indication' (the specific use of a drug based on its demonstrated effects) for another rare condition called chronic inflammatory demyelinating polyneuropathy, filling a further unmet need. It is already a blockbuster drug, generating more than a billion dollars annually in sales, so it has got significant potential. What has been your worst investment? A blood diagnostics company called Quotient. We had a period where it was making good money and then it just sadly fell apart. It got heavily delayed by Covid, and as the company was developing new technology, there was a need for capital. There was a huge stock market bubble, followed by a collapse, then interest rates went up and so did the cost of capital. Sadly, it ended up as a very poor investment. It delisted and essentially went to zero. We got out before that, but not at a great price. The shares were down 99.9pc when we sold in December 2022.
Telegraph
16-02-2025
- Automotive
- Telegraph
‘I invest £2.5bn in the world's most surprising economy'
Fund Of The Week quizzes fund managers about how they're investing your money. If you'd like to suggest which funds you want to hear about and pitch your questions to the managers, sign up to the Investor Newsletter here for more details. After decades of deflation and economic stagnation, Japan has reached an inflection point. The Bank of Japan has raised interest rates twice since July to around 0.5pc, marking a major shift from negative rates. At the same time, corporate governance reforms are finally gaining traction. These initiatives encourage listed Japanese companies to improve shareholder returns by investing for future growth and distributing the cash they have hoarded for many years. Emily Badger, who co-manages the Man Japan CoreAlpha fund alongside Jeffrey Atherton, Adrian Edwards and Stephen Harget, believes corporate governance improvements are a major boon for investors looking to snap up cheap Japanese shares. She explains why Japanese car makers look attractive, even though the sector is overshadowed by the threat of President Donald Trump's tariffs. The fund manager also tells Telegraph Money why Japanese property companies, like Mitsubishi Estate, look cheap. Over the past three years, the Man Japan CoreAlpha fund has returned 44pc versus a sector average 20pc offered by rivals. How do you invest? We have a value tilt and take a contrarian approach to investing in Japanese large caps. We go against the herd and invest in stocks that are unfashionable, where we think valuations look excessively depressed. We look to buy assets the market wants to buy, they just don't know it yet. What is your outlook for Japanese car makers? We are optimistic about the auto sector. Last year, concerns about increased competition from China and the potential impact of tariffs weighed heavily, so with that in mind, we felt it was one of the most contrarian areas within the Japanese market and therefore a big opportunity. For example, in August of last year, we built a position in Toyota [which is held alongside Honda and Nissan].
