The £50m trust that’s investing in the best of British business

Schroder British Opportunities investment fund is a major financier of the UK. The mantra is to invest in the country’s most exciting growth companies – whether private or publicly traded.

“There are some great companies in the UK,” said Tim Creed, one of four managers overseeing the listed trust.

“A few are world leaders, profitable and taking over other companies, but most people will never have heard of them. By investing in these dynamic companies, we hope to achieve a good investment return for shareholders. They are great companies for today’s world.”

So far, the formula has not delivered the returns Schroders expected. While the value of the trust’s assets has remained stable since the fund’s launch in December 2020, the share price has fallen by more than 30 percent.

This is because the prevailing sentiment towards the UK stock market is negative due to the challenging economic situation.

It also reflects the specific negativity in the market surrounding trusts that invest in smaller UK companies and unlisted securities, where their shares trade at a significant discount to the value of the underlying assets.

Creed says such doom and gloom is not warranted, but is part of the territory. He hopes sentiment will change, reducing the trust’s 33 percent discount. If this happens, shareholders will benefit.

“We invest in profitable companies that grow their sales,” he says. They have strong balance sheets, pricing power in their specific sectors and strong management at the helm. At some point, the market will recognize these positives and hopefully revalue our shares.”

The trust, with a market value of £50 million and assets of £74 million, is invested in 26 companies, nine of which are private companies. These nine unlisted companies account for 70 percent of the fund’s assets.

When the trust launched, the idea was to divide the assets 50:50 between public and private companies.

But now the managers can invest up to 80 percent of the fund in private companies. Of the nine, six were purchased when the trust was launched.

The three newer acquisitions include Mintec, a UK-based food commodity prices company. “Mintec is a world leader in its field,” says Creed. “The data it brings together is essential for food manufacturers to make sure they’re paying the right prices.”

He says the company’s subscription-based business model means the company has strong control over revenue – and profits should grow as it expands internationally.

The only divestments to date are three publicly traded companies either bought by private equity (software company Ideagen and financial publisher Euromoney) or acquired (medical information company EMIS). All produced profits for the trust.

Another plus is the stake in the British private company Waterlogic, a supplier of purified water dispensers that are environmentally friendly and do not require plastic bottles. The company merged with water treatment specialist Culligan International, bringing a £2.4 million windfall to the trust.

The four managers – Rory Bateman, Uzo Ekwue, Pav Sriharan and Creed – work as a team, but Bateman and Ekwue are focused on publicly traded stocks while the other two chase opportunities in the private space.

The trust will not appeal to income seekers as its focus is on capital returns. It’s also risky. meaning it should only represent a small portion of a portfolio.

The total annual costs are just under 1.4 percent. The exchange ID code is BN7JZR2 and the ticker is SBO.