Once the darling of the closed-ended fund sector, Syncona (SYNC ) is now proposing a managed wind down as persistently tough biotech markets have brought it to its knees.

A review by the self-managed fund – which focuses on founding, building and funding life sciences companies and had aimed to reach £5bn of assets by 2032 – has concluded that ‘an orderly realisation of its portfolio assets’ and returning cash to shareholders ‘in a timely manner and maximising value’ is the best course of action.

A new capital allocation policy will also be put in place that will continue support to existing portfolio companies ‘which have the potential to provide liquidity via M&A or the public markets, to deliver their identified key value inflection points, and additionally to preserve portfolio company value in third-party financings’.

The shuttering of the fund follows a persistent period of underperformance for the biotech sector, with the S&P Biotechnology index still 52% below its February 2021 peak.

The trust said market conditions have been ‘particularly challenging’ in the early-stage life sciences businesses in which it invests, as they have struggled to access capital as interest rates rose.

Over the past three years, the fund has seen its shares swing from a double-digit premium to a material 50% discount, with the £1bn portfolio being valued at just £567m by the market today.

The shares rose 4.8% yesterday to close at 93.3p after the announcement, but this is a far cry from the 290p peak they hit in 2018, as investors piled cash into the trust and sent the premium soaring at high as 50%.

Over recent years, the investment team, led by Chris Hollowood, has rebalanced the portfolio and prioritised the most promising assets, but it has ‘also listened to the broad range of shareholder views’ and will now seek approval to wind the trust down.

According to Refinitiv data, Wellcome Trust is the largest shareholder with a 30% stake, reflecting Syncona’s origins as the investment arm of the global charitable organisation, before merging with Battle Against Cancer investment trust in 2016 to create the UK’s largest listed life sciences fund.

Hollowood said the share price performance over the past three years – which has seen 54.5% wiped from the value of the fund – has been ‘disappointing’.

However, he said there was ‘significant opportunity to maximise value from the portfolio over the medium term by focusing on the delivery of the key value inflection points’.

‘We are confident in the long-term opportunity to continue creating and building companies leveraging world-class research and are working to explore the possibility of a new private vehicle for interested current shareholders and prospective new investors,’ he said.

Melanie Gee, chair of Syncona, said the fund had been impacted by significant headwinds but the strategic review had ‘underpinned our confidence’ in the management team’s ability to deliver ‘strong risk-adjusted returns from our existing assets over time, as relevant markets stabilise and volatility decreases’.

‘We remain focused on exploring options to provide shareholders with accelerated cash returns and are seeking to offer certain Syncona shareholders the opportunity to roll their interest into a new private fund,’ she added.

The latest annual results – also published yesterday – for the year ending March highlight the ongoing difficulties the fund has faced, with a net asset value (NAV) decline of 9.5%, which was mostly due to a slump in Nasdaq-listed blood cancer treatment company Autolus, whose shares tanked 70% over the year. There were also write downs at Resolution Therapeutics and Biomodal, while Achillies Therapeutics went bust in February.