International Biotechnology Trust

Last updated 12 December 2019

A highly experienced management team and a flexible portfolio of quoted and unquoted biotechnology stocks, with a yield target of 4% of NAV...

Disclosure – Non-Independent Marketing Communication

This is a non-independent marketing communication commissioned by International Biotechnology. The report has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on the dealing ahead of the dissemination of investment research.

International Biotechnology Trust

International Biotechnology Trust (IBT) has delivered a solid performance of 14.3% in NAV terms this year and grown its dividend by 4.1% in the face of difficult conditions for biotech companies.

Volatility in broader equity markets – spooked by fears of a trade war, the Brexit debacle, and tensions in the Middle East – has not helped biotech, which tends to perform poorly in ‘risk off’ environments, but IBT’s unquoted portfolio, a unique feature of the trust, has lent considerable support to NAV returns during a period when the listed portfolio has struggled.

Read more about how the unquoted portfolio has helped support IBT’s returns…

The trust’s decision to pay out 4% of NAV annually in the form of dividends, drawn entirely from capital, continues to pan out well for investors who have seen a full year dividend of 28p in 2019, up 4.1% on last year’s payout and more than 20% higher than the dividend in 2017. In yield terms, the trust stacks up strongly even against trusts designed specifically for income investors – with a higher yield than the average trust in the UK Equity Income sector – and the trust’s discount has narrowed sharply on the back of steady demand for its shares since the income commitment was introduced.

Read more about IBT’s discount and new share issues…

2019 has been a bumpy ride for biotech investors with gains made in the first half lost in the autumn, before a sharp rebound in October. Healthcare is a traditional football for all candidates in the run up to a general election in the United States, so more volatility is not unlikely. The managers say prices are depressed relative to other S&P sectors, but think the fortunes of the sector could improve ahead of the US election as the market begins to realise the extent to which valuations are depressed.

In our view the biotechnology sector has significant tailwinds behind it, and this trust is well set up to benefit from them whilst avoiding the worst of the volatility which tends to torment investors in more ‘risk on’ sectors like this. The trust’s unique focus on avoiding binary risk events has helped it to avoid a number of ‘blowups’ which have affected its rivals, and its unique unquoted portfolio is already proving its worth, with an average yearly internal rate of return (IRR) of 16% despite the venture fund being only 70% invested at this stage. Expected distributions from the fund mean that IBT will only need to make limited cash contributions going forward to meet its commitment.

Read our view on the trust and its core strengths…

Pascal Dowling
Pascal is a partner at Kepler Partners LLP and launched Kepler Trust Intelligence when he joined Kepler in 2015. Prior to this he managed FE Trustnet, one of the UK's largest investment research websites, for ten years. In a former life Pascal was a financial journalist and he has written extensively about investment trusts and other investments for the trade and national press.

Fund History

Related Research

Key facts

Investment objective

To achieve long-term capital growth by investing in biotechnology and other life sciences companies

As at:

06/12/19

Trust Name

International Biotechnology

Ticker

IBT

Management Company

SV Life Sciences Managers LLP

Manager Name

Carl Harald Janson; Kate Bingham; Alisa Craig;

Association of Investment Companies (AIC) Sector

Biotechnology & Healthcare

12 Mo Yield

0.0%

Dividend Distribution Frequency

Semi-Annually

Source: Morningstar

Disclaimer

This report has been issued by Kepler Partners LLP.  The analyst who has prepared this report is aware that Kepler Partners LLP has a relationship with the company covered in this report and/or a conflict of interest which may impair the objectivity of the research.

Past performance is not a reliable indicator of future results. The value of investments can fall as well as rise and you may get back less than you invested when you decide to sell your investments. It is strongly recommended that if you are a private investor independent financial advice should be taken before making any investment or financial decision.

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