International Biotechnology 15 September 2023
Disclosure – Non-Independent Marketing Communication
This is a non-independent marketing communication commissioned by International Biotechnology. The report has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on the dealing ahead of the dissemination of investment research.
To achieve long-term capital growth by investing in biotechnology and other life science companies.
International Biotechnology Trust
SV Life Sciences Managers LLP
Ailsa Craig; Marek Poszepczynski; Kate Bingham; Houman Ashrafian;
Association of Investment Companies (AIC) Sector
Biotechnology & Healthcare
Dividend Distribution Frequency
Latest Market Capitalisation
Latest Net Gearing (Cum Fair)
Latest Ongoing Charge Ex Perf Fee
(Discount)/ Premium (Cum Fair)
Daily Closing Price
International Biotechnology Trust (IBT) is designed to give investors a convenient way to participate in an actively managed exposure to a specialist area of the stock market. Ailsa Craig and Marek Poszepczynski have worked together on the team managing IBT for a decade, becoming co-lead managers in March 2021. The trust’s board has recently announced that the trust is expected to move to Schroders in November (see Management section), which will see the co-lead managers move with the trust, and importantly with no change to the way the portfolio is managed.
Whilst the biotechnology sector is expected to deliver significant long-term growth, it is subject to a high degree of volatility – particularly at a single-company level. This is where the opportunity comes for pragmatic, valuation-sensitive investors, such as Ailsa and Marek, especially with their focus on risk management. As a result, as we demonstrate in the Performance section, as at 12/09/2023, IBT has not only outperformed the benchmark and peers over one, three and five years, but it has done so with lower volatility, especially relative to the peer group.
IBT’s dividend provides a highly differentiated source of income for investors who would not otherwise have much of an opportunity to get exposure to the area. The high yield, which currently sits at 4.2% on a prospective basis (see Dividend section), is married to the potentially strong capital growth available from the biotechnology sector. One might argue that, in being paid from capital, IBT’s dividend payments are significantly more secure than those derived from trusts or funds which pay dividends from current income.
The biotechnology sector remains out of favour, reflected in low valuations when compared to history. Year to date, large-cap technology has once again led the pace in performance terms, but the biotechnology sector has also underperformed wider equities. Given the significant performance differential between technology and biotechnology in only eight months, active or contrarian investors may see this as an interesting moment to consider recycling gains made this year from high-performing technology stocks into the significantly lower-priced biotechnology sector, given that both are powered by deep scientific innovation, capable of generating attractive capital growth.
As at 12/09/2023, IBT has outperformed its benchmark over one, three and five years, which we illustrate in the Performance section. However, more impressive, in our view, is the considerable degree of outperformance relative to biotechnology-focussed investment trust peers. This has been achieved through the consistent application of the team’s investment philosophy and approach, which encompasses an awareness of risk and a desire to provide a lower-volatility return. In a sector which has historically exhibited considerable volatility, especially at a single-company level, this is a key attraction for investors, in our view.
In our view, the case for investing in biotech is backed by long-term secular growth themes. M&A activity continues to demonstrate that valuations are attractive to corporates, and there is a case to be made that further newsflow on this front will catalyse investor interest, leading to valuations picking up and more IPOs appearing on the horizon. This would clearly be good news for IBT in NAV terms, as well as potentially leading the discount to narrow once again.
- Strong and specialised team with a unique approach to investing in biotechnology sector
- Offers the combination of a solid dividend yield and good prospects for capital growth
- Risk-mitigating investment process has, historically, seen the trust deliver good performance with lower volatility than the benchmark
- Biotechnology sector is inherently more volatile than wider equity indices
- Political interference in the sector can add to volatility
- Gearing levels can be detrimental to performance