Chrysalis (CHRY ) has racked up a second quarter of growth as the out-of-favour Jupiter growth capital fund strives to win back investors after its punishing selloff since the top of the market in 2021.

In the three months to 20 June, net asset value (NAV) per share grew 6.84p or 5.3% to 136.86p, building on the 1.4% increase in the first quarter, which marked its first advance since September 2021. 

With stock markets doing better than expected this year, fund managers Richard Watts and Nick Williamson said gains in the value of its mostly unquoted companies added 9.28p to NAV per share before currency movements and fees knocked off 2.44p per share. 

However, on an extremely wide discount of 45%, the shares, up a penny to 75p today, have a long way to go. They lost over two thirds of their value last year and trade well below their September 2021 peak of 271p. 

The fund managers did not disclose which companies generated the second quarter growth but analysts at Stifel and Numis, Chrysalis’ corporate broker, said uplifts in its three largest holdings were the main driver of returns. 

The fund’s stake in online insurer Wefox rose to £187m from £165m after a strong first half left it accounting for 22.9% of assets. 

Starling bank advanced to £138.3m from £124m, a weighting of 16.9% in the fund, after achieving ‘impressive’ progress despite the departure of chief executive Anne Boden. That is reassuring to investors after Chrysalis increased its stake in the challenger bank, buying shares off Watts’ Jupiter UK Mid Cap fund in February.

Brandtech, the digital media group that bought AI marketer Pencil and saw its value in the fund growth to £107m from £95m, just over 13% of assets.

Buy-now-pay-later lender Klarna, which was once the top holding but saw its valuation slashed by more than 80% last year, also did well. ‘Klarna continues its drive towards profitability, with its first quarter results showing adjusted operating losses falling by over 78% since the same quarter last year,’ said Watts and Williamson.

‘We have continued to support and work alongside our portfolio companies, and we exit the period with a portfolio that is generally trading robustly against a challenging economic backdrop, and which is largely well-funded,’ the managers added. 

Net cash stood at £30m after a £12.5m investment in Smart Pensions as part of a fundraise led by Aquiline Capital Partners, and a £2m top up to gaming hardware provider Tactus to strengthen its balance sheet and support a debt refinancing.

Chrysalis also holds £10m of shares in Wise (WISE), the listed money transfer specialist which it counts as a liquid holding. The position was reduced from nearly £12m in March after the mangers sold £3.1m at an average price of 620p in June.

Stifel analyst Iain Scouller continued to believe that the fund’s cash, at around 3% of assets, was ‘a relatively small amount’ but agreed with the fund managers that a flotation or sale of one of Chrysalis’ companies would ease doubts over valuations and provide a vital slug of cash.

‘However, this may be easier said than done in this environment,’ he added.

For their part the managers said: ‘We are encouraged by the slightly more active IPO [initial public offer] market over the last quarter, particularly as we have several later-stage assets that are either profitable or funded to anticipated profitability and should make excellent IPO candidates in due course.’

Having launched five years ago this November, Chrysalis faces its first continuation vote next year. At half-year results last month, the board said it would issue proposals in the first quarter of 2024. These will give investors the choice of either continuing the fund, which would reinvest its investment gains into new companies, or putting the company into a managed wind-down in which the proceeds of sales would be gradually returned to shareholders.

Numis said Chrysalis’ wide share price discount offered ‘signficant value’.

‘We believe the board are starting to take some sensible steps to address shareholder concerns, although the key tipping point for sentiment is likely to remain realisations,’ said analysts Ewan Lovett-Turner and Andrew Rees.