Jupiter  

Chrysalis loses £200mn after rotation away from growth

Chrysalis loses £200mn after rotation away from growth
(AP Photo/Richard Drew)

The rotation away from growth stocks has hit Chrysalis Investments, which reported a 9 per cent drop in valuation last week.

The trust’s total net assets fell over £200mn in the six months to March 31, from £1.38bn to £1.26bn, according to interim results for the trust released on June 30.

This led to net asset value per share dropping 16 per cent in the period.

The trust attributed the loss in value to “weakening valuations of listed peers in the tech space”, with chair Andrew Haining saying the investment landscape has materially changed in the past six months.

He said: “Rising yields have impacted the valuations of long duration assets, with the derating of growth stocks being particularly marked. 

“The appetite or ability to provide capital has reduced and, consequently, those investors who are providers of capital are demanding very attractive terms.”

Haining added that, as a result of the “attractive terms” being demanded from capital providers, the trust has ensured it has enough capital to support its portfolio.

The trust has struggled against its benchmark in the last six months, posting a total return of -33.7 per cent compared with its benchmark losing 26 per cent, according to FE Fundinfo. 

The trust is managed by Jupiter Fund Management, which took over when it acquired Merian Global Investors in February 2020.

It invests in early stage, mostly unquoted, companies, and was launched to allow the fund managers to invest in unquoted equities - their specialism prior to the trust’s launch was investing in quoted small caps. 

Portfolio funding plans

Around 60 per cent of the portfolio is not currently profitable, and the trust said it has been working with these companies on refining funding plans.

The average “cash runway” for the portfolio’s non-profitable holdings, the amount of time a company has enough cash for, is 14 months.

The trust’s managers said it currently holds £55mn in cash, which is enough to extend these runways “substantially”, by at least a year, provided other investors also plug money in.

However, the co-portfolio managers of the trust, Nick Williamson and Richard Watts, said while they recognise the current discount to Nav, they should still hold enough capital to support the existing portfolios while this “market dislocation” remains.

“Material falls in listed valuations typically create headwinds for our near-term Nav progression, but in our experience, shakeouts of this type also provide opportunities for the best companies to exploit in the medium term.

“If and when market conditions allow, or Chrysalis generates capital, share buybacks or new investments might be considered."

In January Jupiter said it will review the management fee structure on the trust after Watts and Williamson were paid a £60mn performance bonus for the year to September 2021.

New CEO

The chief executive of Chrysalis' manager Jupiter, Andrew Formica, announced he will step down from the firm last month.

Formica will step down in October this year, and will be replaced with chief investment officer Matthew Beesley, with the former saying the "initial phase" of the businesses' transformation had completed.