Amid the wave of M&A activity hitting investment trusts, multiple sectors are shrinking rapidly, leaving investors with fewer options. Growth capital, where funds buy fast-growing unlisted stocks, is one such sector.
Former investor darling Chrysalis Investments (CHRY), which bought into the likes of Starling Bank and Klarna, is now in a managed wind down, and will gradually sell its portfolio over the next three years. Shareholders approved the resolution last week.
Augmentum Fintech (AUGM), which technically sits within the Association of Investment Companies’ financials sector but also invests in fast-growing private companies (focusing on the fintech sector), has become the target of a cash offer from buyout firm Verdane. The offer has the board’s support, even though it’s raised a few eyebrows because it values the portfolio at a 30 per cent discount to net asset value (NAV); it still needs shareholder approval, but could feasibly pass.
And finally, Schroders Capital Global Innovation (INOV), once the infamous Woodford Patient Capital trust, began winding down at the start of 2025.
That only leaves three growth capital trusts with more than £100mn in assets: the Baillie Gifford-run Schiehallion (MNTN), Molten Ventures (GROW) and Seraphim Space (SSIT). All three have seen a major re-rating in the past year, even though share prices for the first two are still far from their 2021 peaks.
The prior years had been very difficult for the sector, which had grown used to being able to access ample cheap capital. From 2022, it had to contend with higher interest rates and very different economic conditions. Many investors who entered the market in 2020 or 2021 will have been badly bruised.
“It has often only been possible to launch growth capital funds in periods of investor exuberance,” says James Carthew, head of investment companies at QuotedData. “That means that the entry prices for some investments [were] too high, and the projections over-optimistic.”
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For a while, growth capital trusts had the advantage of looking very cheap, but Schiehallion now trades just below NAV, while Seraphim Space is on a small premium. Molten Ventures is the only one still on a notable discount – 37.6 per cent as at 26 March. As the chart below shows, all three trusts are pretty concentrated, especially Seraphim.
Molten Ventures arguably has the most diversified portfolio of the trio, but also the most complicated. It invests in technology start-ups in Europe and the UK, across a range of sectors including fintech, software, AI, and health and wellness. The portfolio is split into three sections: 16 ‘core’ holdings accounting for 62 per cent of the portfolio as at last September (only six of which are profitable); 64 ‘emerging’ companies, which tend to be at an even earlier stage (18 per cent of the portfolio); and the rest in funds.
The trust’s exposure to software companies meant that it was swept up in the sector’s sell-off earlier this year, with investors concerned that AI might destroy business models.
“[Molten Ventures’] discount is still way too wide – it is perhaps unsurprising that Saba has taken a stake,” says Carthew. “It feels like a much more complicated proposition – lots of holdings, not particularly retail-friendly communication.”
Its biggest holding is challenger bank Revolut, at 10.6 per cent of the portfolio, which after years of tribulations finally obtained a full UK banking licence last month. The trust also invests in Finnish satellite operator ICEYE, which is performing incredibly well. Carthew says he was “surprised” to see Molten’s managers partially selling down the investment last December, when they offloaded a £17.5mn stake to take some profit; the remaining holding is still valued at around £85mn, which roughly equates to 6 per cent of the portfolio.
One of the reasons the other two trusts are more highly valued has to do with space. At the time of writing, SpaceX (pictured) is rumoured to be on the verge of filing for an IPO – although as has often been the case in the past few years, one has to wonder whether market conditions will end up delaying the listing after all.
Schiehallion has about a tenth of its portfolio in SpaceX. It is not the only high-profile name in the trust’s top 10, which also comprises TikTok owner ByteDance and AI company Anthropic, at 7.9 and 3.3 per cent of the portfolio, respectively.
At almost 15 per cent of the portfolio, the trust’s biggest holding is Italian start-up Bending Spoons; Carthew argues that Schiehallion “maybe needs to provide a bit more information” around it. The company acquires digital businesses (video hosting platform Vimeo is a recent example) and tries to improve them, a process that often involves sweeping lay-offs. Bending Spoons, valued at $11bn in its last fundraising round, is eyeing an IPO in the US.
“The problem [with Schiehallion] is that investors got over excited in 2021 and the unwinding of a significant premium upset a lot of shareholders. I think we are past the worst here,” says Carthew, albeit he suggests that future sentiment hinges a lot on the SpaceX listing.
Meanwhile, there is a lot of excitement about Seraphim Space, which focuses on the space tech sector. To the non-initiated, the hype around this area may seem a little strange – but you shouldn’t be thinking about the likes of sending astronauts to the moon here.
“‘SpaceTech’ stretches into areas of digital infrastructure, connectivity, communications, as well as observation, climate and defence, and so is highly relevant at the current time,” explains Gordon Smith, head of fund research at Killik.
Some 39 per cent of Seraphim’s portfolio is in ICEYE. Through satellite imaging and monitoring, the company provides intelligence across a range of sectors, including natural catastrophe response, security, maritime monitoring and finance. It more than doubled its revenue between 2024 and 2025, going from €103mn to €250mn, with Ebitda of €100mn in 2025. The company recently secured a €1.7bn contract to deliver space-based reconnaissance capabilities for the German armed forces via a joint venture with German defence company Rheinmetall (DE:RHM).
Panmure Liberum analysts think the trust should be trading at a premium and tentatively compare it to 3i’s (III) past success with its holding Action, although in a very different sector and business model.
“We can’t find any other comparison in the listed growth capital and private equity space in the last ten years with a similar growth trajectory,” they say. “3i’s Action could sustain supernormal growth for years, and SSIT’s investments don’t yet have that track record. But the structural environment should, in our view, support long-term growth well into the double digits, which should be rewarded with a persistent premium to NAV.”