The Schroder British Opportunities trust has revealed it has taken a 30% profit on one of its holdings, just weeks after launching.
In a portfolio update, managers Tim Creed (pictured) and Rory Bateman confirmed they had exited their position in Calisen following a successful bid to take the smart meter provider private.
In December a consortium of investors, including Blackrock Alternatives Management and Mubadala Investment Company, offered to pay $1.9bn (£1.38bn) for Calisen – a 26% premium on its closing share price.
After Calisen’s directors and private equity giant KKR, which owned 73% of the company, voted in favour of the deal, Creed and Bateman decided to relinquish their first holding, believing a counterbid was unlikely, and pocket the circa 30% return.
Trust has deployed 70% of capital
Creed and Bateman said they had now purchased 23 listed holdings and three private equity holdings.
This means the trust has become 70% invested in the seven weeks since listing at the end of November. Though Creed and Bateman were hoping to raise £250m at IPO, they only managed to attract £75m, the same amount raised by the Schroder BSC Social Impact trust in December.
On the public side of the portfolio, the pair have been loading up on industrials and had scooped up shares in ventilation product supplier Volution and Polypipe, which manufactures plastic pipes for underfloor heating.
“Industrial manufacturers are recovering well, as seen via stronger PMI data, and against a backdrop of rising housing starts, improving ‘Repair, Maintenance & Improvement’ activity and low interest rates,” they said.
Tech was also identified as a key theme in the portfolio, with Creed and Bateman highlighting video games outsourcer Keywords Studio as a holding that had seen its share price rise.
Renewed lockdown could dampen investor appetite for UK Smid
The managers said they were “wary” of having too much direct exposure to consumer cyclicals but added they had identified some specific bottom-up opportunities, such as Trainline and Gym Group, which were “relatively better placed to navigate the crisis than others in the sector”.
Although there has been a resurgence in international investors buying UK stocks following the agreement of the Brexit trade deal, the trust’s managers admitted the upside in the small to mid-cap space could be hampered in the short-term due to renewed lockdown measures.
“Despite this, our enthusiasm and belief in this once-in-a-generation opportunity is undiminished,” they said in the portfolio update.
“We believe that the valuation dislocation between many UK companies and their global peers is likely to persist and we continue to see significant opportunities to provide capital to small and mid-cap companies to help them achieve their growth potential.”
Schroders ponies up cash for trio of private equity fund-raises
Creed and Bateman have also kept busy on the private equity side, purchasing shares in three unquoted holdings in under a month.
Toward the end of December, the trust initiated positions in the Learning Curve Group, a Durham based education and training company, and Graphcore, which makes chips designed for use in artificial intelligence.
Last Thursday it participated in a $300m funding round for Rapyd, a cross-border digital payments provider.
Rapyd is now valued at $2.5bn, while Graphcore is worth $2.8bn after it raised $222m from investors including Baillie Gifford, Fidelity and Schroders.
“Our pipeline of companies seeking private equity capital is strong and we expect to make further announcements in due course,” the managers said.
