Over 30% NAV decline for Schroder UK Public Private trust

The report comes out just over a week after the trust was forced to issue a NAV statement after management had identified that one of its top ten holdings – BenevolentAI – had been subject to an administrative error. The stock’s value had been accidentally overexaggerated having been “held at the valuation on the date of completion of the transaction with Odyssey and not updated for the quoted price on a daily basis since 26 April 2022”.

As a result, the trust’s NAV was reported higher than it was, since it failed to account for BenevolentAI’s declining value since it floated on the Euronext exchange.

In the notes, it detailed that at 27 September BenevolentAI’s the price had fallen to €4.18 per share, valuing the company’s holding at £17.7m, this was in fact almost £15m lower than the valuation included in the interim accounts and would reduce the company’s NAV per share by 1.65p.

Valuation blunder at Schroder UK Public Private adds salt to wounds of ex-Woodford trust investors

The admin error was caused by the company’s outgoing AIFM Link Fund Solutions, a company embroiled in the ongoing Woodford scandal. The SUPP used to be the Woodford Patient Capital Trust but was taken over by Schroders in December 2019.

In the report, SUPP chair Tim Edwards addressed the issue: “I would like to assure shareholders that the board has engaged with all service providers so that this unfortunate incident is not repeated.”

This was echoed by the fund’s managers Tim Creed and Roger Doig, who said the mistake “will not be repeated following the transition of the AIFM role to Schroder Unit Trusts Limited”.

BenevolentAI remains the trust’s third biggest holding.

According to the report, the trust’s net asset value fell by 31.8% and a share price decline of 36.1%, as of 30 June, reflecting the bleak year.

However, the majority of the decline was not due to this one valuation incident, according to the management.

Edwards said the main cause was the “challenging period for equity markets” the past six months.

Link Group takeover deal collapses on FCA Woodford conditions

He said: “Against a global backdrop of elevated energy costs, disrupted supply chains, sustained inflation and rising interest rates, investor sentiment towards ‘growth’ stocks fell sharply in the first half of the year. The company’s listed holdings were not immune to these pressures,” although its private equity holdings were “more resilient” to the volatility.

The discount on the trust had also widened to 35.5% from 31.2% at the end of December last year. To date, the discount has fallen even further to 46.6%, according to the Association of Investment Companies.

As of 30 June, the trust held 34 holdings, made up of 11 quoted and 23 unquoted. A footnote detailed this excluded 10 holdings with no value.

Since taking over management of the trust two years ago Schroders has been focused on reconstructing the portfolio away from its previous managers’ style.

According to the Schroders team, the “portfolio of new private equity investments has started to take shape” having made eight investments already, two of which were post period.

Its private equity holdings are focused on three ‘core’ areas: venture, growth and life sciences.

But it has admittedly not been easy to escape the shadow of its previous manager, as events of this past week made apparent.

In his chair statement Edwards said “performance has been challenging during this time” but added that “significant progress” had been made to reduce what he called the “prohibitive levels of debt” in the balance sheet and with rebalancing the portfolio.

He added that widening the mandate to have a global investment universe meant the trust had a “wider pipeline of opportunities”.

As a result, Edwards said the trust was not in a “better position” to take advantage of more international opportunities, which should feed into stronger long-term performance.