Schroders Capital Global Innovation Trust (INOV) has ‘altered its liquidity mix’ by selling a significant proportion of its publicly-listed holdings to fund share buybacks.

Half-year results today showed that the former Woodford Patient Capital trust sold £21.1m of its listed shares in the six months to 30 June and £3.4m from its unquoted private equity holdings. This along with £6.5m in cash will be used to buy back its shares which have fallen to a 51% discount to net asset value (NAV).  

Earlier this month the £223m trust announced it would restart purchasing shares, after it had to halt activity because it breached the Companies Act due to lack of distributable reserves.  

The company plans to repurchase at least 5% of its shares in 2023 and also in 2024. In addition, it will buy more to ensure it has returned to shareholders a quarter of the cash generated from selling legacy holdings of former manager Neil Woodford by the 2025 annual general meeting, which features a continuation vote as it will mark the trust’s tenth anniversary.

In the interim report, fund managers Tim Creed and Harry Raikes said they had made ‘notable progress’ in ‘altering the liquidity mix to ensure the company is appropriately positioned to execute the buyback programme efficiently and to support the existing portfolio’.

‘We have reduced the exposure to certain public holdings with the goal of reducing concentration risk, and positioning the portfolio to better align with the renewed focus on private equity,’ Creed and Raikes wrote.

The pair exited the following: Johnson Matthey, a British sustainable technology company; Spirent Communications, a British telecommunications testing company; and private equity company Petershill Partners. They also reduced holdings in DNA-sequencing company Oxford Nanopore, biotechnology company Immunocore and IDEX Biometrics, a Norwegian biometrics company.

Oxford Nanopore, which remains the trust’s largest holding making up nearly 23% of the portfolio, hurt returns as its shares dropped 13.5%. It along with BenevolentAI, a Netherlands-listed drug discovery and development company, and AMO Pharma, a Leeds-based unquoted pharmaceutical company (both of whose performances were flagged in a second-quarter update earlier this month), led to a 13.3% decline in NAV from 28.52p per share to 24.73p.

The trust’s discount widened from 45.8% to 51.3% as the share price suffered a bigger 18.9% fall from 15.47p per share to 12.55p per share. 

The managers said they were ‘frustrated by the lack of selling opportunities’ in a market gripped with fear over inflation and rising interest rates. The legacy Woodford holdings, which the Schroders duo took on in December 2019, continue to make up a substantial part of their portfolio at 32 of the 45 investments.

However, Creed and Raikes did manage to sell healthcare company Origin Inc, which had a holding value of zero at the end of 2022, for less than £0.2m.

The managers are also looking to make new investments as they see the ‘current environment of slower fundraising activity and lower valuation expectations as a favourable one in which to deploy capital’. However, they are ‘closely monitoring the capital available for new investments, which remains dependent on the execution of the board’s buyback strategy, which is the priority.’

In the six months, they invested in AgroStar, an Indian agricultural technology start-up, and Carmot Therapeutics, a US-based biopharmaceutical company. They also made a follow-on investment in iOnctura, a clinical-stage oncology company, which entered the portfolio in November last year.