Over the past few months, The Armchair Trader has covered some of the most veritable and storied names in the investment trust universe, some with histories of over a century. This week we look at one of the newer additions to the investment trust roster, the GBP290m Intuitive Investment Group (IIG) LON:IIG
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IIG was established four years ago and listed on AIM in December 2020. The investment trust focuses upon the biotechnology and healthcare sector, and emerging technology, and has appointed SP Angel Corporate Finance as financial adviser. A closed-ended investment company, which moved onto the Specialist Fund Segment of the exchange last year, IIG provides investors with exposure to a portfolio of investments concentrating on fast growing and high potential technology and life sciences businesses operating predominantly in the UK, continental Europe, the US and the Asia-Pacific region.
Strong and experienced board
Headquartered in Manchester, the investment process is run by committee, with Giles Willits as investment manager. Chartered accountant, Willits has a prior career in City boardrooms, as CFO of AIM-listed IG Design Group LON:IGR, and former FTSE250 listed Entertainment One (eOne), now owned by Lionsgate [NYSE: LGF.A] and was director of group finance for Sainsbury’s LON:SBRY and was involved in raising GBP700m in equity and GBP1bn in debt financing to support more than 25 M&A transactions.
He is assisted on the investment committee by Robert Naylor, as CEO, a corporate finance and broking veteran; Nigel Rudd, IIG non-exec chairman and City grandee with prior roles at vehicle retailer, Pendragon, Pilkington Glass and pharmaceutical company, Alliance Boots, and other advisors. The investment committee is advised by sector specialists including Dr. Stewart White, an executive at several life science companies; Ron Long, an experienced biosciences entrepreneur, with expertise in pharma start-up and turn-around situations; Per Matsson formerly chief technology officer at Thermo Fisher Scientific; and Alastair Smith, CEO of Avacta Group LON:AVCT.
The investment trust targets an average return to shareholders of 20% capital growth per annum and does this through early and later stage investment into Life Sciences and Technology companies. Given the nature of these sectors, IIG follows a high-conviction investment strategy holding a small, concentrated portfolio of investments with no restrictions on size of portfolio.
Uncorrelated investment approach
The investment committee doesn’t concern itself with index weightings, instead the companies which it thinks have the best opportunities will receive the most money, regardless of company size. Moreover, ‘following the science’, IIG does not seek diversification in the biotech sector, but rather will invest in the opportunities that present themselves, and if that means the investment trust will invest in a ‘hot’ novel treatment or therapy, whether that is mRNA vaccine research, or nonopioid pain treatment that’s what it will do, and deploy the fund’s capital accordingly.
Again, marking out IIG from other investment trusts, the fund managers have no restrictions on the size of the stake that they hold, and if the investment committee feel strongly on one position, the fund can hold up to 100% of the capital of the company. Although IIG will mainly take equity positions and will also invest in equity-like instruments – such as convertible debt.
Private company investment
The fund is also unconstrained as to the type of company it can invest in – with the ability to invest in listed companies, whose shares are quoted on public exchanges. But the fund also has the mandate to invest in unquoted, privately-held biotech and technology companies. The fund invests directly or through special purpose vehicles, intermediate holding companies or through subsidiaries. The fund also has the ability to invest in LLPs or other legal entities.
IIG is a very hands-on investor and will through their stakeholding in a company seek nomination to the board if the committee thinks it will be beneficial and are very keen to deploy the company’s capital markets and industry experience to help the companies in which it invests achieve their goals. The investment committee does not have a specified investment horizon and will exit an investment when it deems to have reached its target return, but also has the flexibility to hold the company it has invested in for as long as it chooses.
The fund does not track a benchmark and just seeks total return. This uncorrelated flexible approach has worked out quite well for IIG over the past year (to 16th April according to Hargreaves Lansdown) with a return of +119.13%. However, the company does have some volatility and operates at the sharp end of emerging technology, biotech and life science, and over two-years was down -30% and over three-years was down -46.6%. Recent performance has been picking up, however.
According to the AIC (of which IIG is not a member) the fund is trading at discount-to-premium of -2.45% and Hargreaves Lansdown reports the fund has an ongoing charge of 1.4%.
Intuitive Investment Group top five listed holdings
| Investment | Weighting1 | Sector |
| Light Science Technologies LON:LST | 77.7% | Machinery: Agriculture |
| Shield Therapeutics LON:STX | 6.7% | Pharmaceuticals |
| Evgen Pharma LON:EVG | 4.9% | Biotechnology |
| Polarean Imaging LON:POLX | 4.4% | Medical Equipment |
| Trellus Health LON:TRLS | 3.5% | Healthcare Services |
Source: BlackRock, year ended 30 September 2023
1. As a percentage of listed portfolio
The fund also holds significant unquoted positions, including GBP3.88m in Touchless Hygiene, just over GBP1m in BioQ Pharma, and just under GBP1m in PneumoWave Limited. The fund does not use hedging or derivatives to amplify its positions, nor does it have the intention of borrowing currently. What you see is what you get.
Biotech and pharma and emerging technology are notoriously hard markets to understand and to track, and have high rates of failure. The investment committee of IIG has been around the block, and this investment trust could be a great way to get exposure to the sectors.
Last year (October 2023) IIG completed a game-changer of a deal, buffing the company from something of a minnow to a GBP300m entity, when it made a large investment into Chinese lottery business Hui10, a company valued at USD365m in exchange for the issue of 1,911,529,540 new Ordinary Shares in IIG. IIG had two billion shares in issue, meaning that now IIG fully-owns Hui10 and Hui10 owns 95% of IIG.
Hui10, a technology company, itself holds around one-third of Beijing Huishi Dehua Information Technology Company, a digital payments platform, and 60% of Beijing Huishi Chunyuan Technical Development Company, a FMCG retailer, trading as Lucky World, which together are trying to increase China’s 100 million lottery players giving greater access to the games to more of the Republic’s 1.1 billion adults.
Willits joined the IIG board to chaperone the investment trust’s investment in Hui10, a role well-suited for his skill-set, given his prior experience at Entertainment One, the former FTSE250 entertainment corporation and being a backer of the Chinese company since 2018.
IIG has always been a flexible vehicle, and its ability to pivot efficiently lead to an almost overnight transformation, which Rudd said: “has the capability to return shareholders many times their investment at flotation and from the current share price.”
What next for IIG?
