Seraphim Space Investment Trust [LON:SSIT] published its results last week. Seraphim is the world’s first listed space-focussed investment trust and invests in a diversified portfolio of early-stage and growth-stage companies across the global space sector. Their focus includes satellite communications, space exploration technologies, and space-enabled applications.
In the third-quarter results for the three-month period ended 31 March 2024 Seraphim maintained its positive momentum with a NAV total return of 0.8%. The fund opened the week’s trading (10th June) at 66p up 27.7% over three-months and up 82% over one-year.
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The fund is part of the Association of Investment Company (AIC) Growth Capital sector, a sector of seven diversified funds which the AIC defines as investment companies that invest in growth shares, where the managers generally take non-controlling stakes in early to maturing companies. Seraphim tops this little group in terms of share price total return over one-year, which the AIC reports as +84.5%, against a sector average of +25.5%.
Majority of portfolio companies fully-funded
The fund traded at a 30% discount-to-premium and had an ongoing charge, excluding performance fee of 1.89%. It’s a reasonably new fund, having listed in July 2021, but has around GBP225m assets under management. Seraphim saw its portfolio valuation increase by 1.4% over the period to around GBP200m, driven by a GBP1.9m fair value gain and a small FX gain. The investment trust said that 72% of the portfolio by fair value is funded for at least 12-months, with 61% fully-funded based on latest projections from the companies’ management teams and 11% funded for 12-months or more from 31st March.
The fund has had an exciting year. Its management said: “The first quarter of 2024 demonstrated a continued recovery in investment in space economy. We believe this could be catalytic for unlocking additional activity, now reaching three consecutive quarters of recovery.”
“The standout deal of the quarter was the Shanghai Spacecom satellite technology Series A, driving much of the quarter’s investment. As a result, this was the first quarter in which Asia raised the highest level of investment. Europe also had a strong quarter with several significant later stage deals, a strong signal given growth capital is an area where Europe typically struggles.”
Although exploring space, the final frontier, Seraphim hasn’t yet explored the dividend frontier, and given the growth orientation of what is a very new industry and a reasonably new fund, it’s not expected that Seraphim will venture anywhere into the dividend space in the near future.
The space sector is estimated to be worth over USD469bn, with the commercial market making up the lion’s share and analysts predict an annual growth rate of up to 11%. Traditionally the space exploration sector has been dominated by state actors as part of bigger geopolitical power games, however, over the past decade there has been a surge in private investment with over USD50bn poured into the sector since 2015.
Only serious player in the game
Individual investors can invest in individual space-orientated stocks, companies that are involved in space exploration, satellite technology or space tourism. Up until the beginning of the year investors could tap into the space industry through the ETF Procure Space, managed by HANetf. However, in February the manager merged Procure Space with its Future of Defence UCITS ETF (NATO). There are also a range of VC funds that operate in the space industry.
However, Seraphim gives investors a broad range of investment possibilities from ground-based facilities to outer space exploration. The three elements of the space industry have traditionally been satellite manufacturing, support ground equipment manufacturing, and the launch industry. With the likes of privately funded firms like Space X and Virgin Galactic, space tourism now joins that list. Given the War in Ukraine, and the West being cut off from access to technology from Russia’s Soyuz launch vehicle family and infrastructure, a boom in contracting out the launch job to private corporations has started to take shape.
From strength-to-strength
The fund is managed by CEO Mark Boggett, James Bruegger and Rob Desborough.
Boggett said in a statement: “The portfolio has continued to go from strength-to-strength, with three of the company’s biggest holdings, ICEYE, D-Orbit and HawkEye 360, having closed sizeable new rounds since the start of the year, allied to several of the company’s listed holdings, Spire Global and AST SpaceMobile, having both closed landmark partnerships with the likes of NVIDIA, Verizon and AT&T and successfully raised additional funding from public market investors.”
Space exploration is undoubtedly an exciting sector that could have vast rewards. However, it is also a risky venture – the story of Bowie’s Major Tom is testament to the risks. Seraphim Space is a focussed-fund operating in a high-growth sector with the potential for high returns. It has an experienced crew at the helm that know the space sector well after decades operating in the field. With a diversified portfolio, and the only significant player in the game, Seraphim has access to promising startups that could well become major global (and galactic?) players in the future.
However, given the newness of the sector, there is a limited track record to judge the fund by and assess performance on a discrete or comparative basis.
