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13 October 2021

Seraphim Space Investment Trust

Why even Branson has backed the burgeoning investment vehicle


The words richest person, Jeff Bezos, recently said ‘When I have a good quarterly conference call with Wall Street, people will stop me and say, “Congratulations on your quarter,” and I say, “Thank you,” but what I’m really thinking is that quarter was baked three years ago. Right now, I’m working on a quarter that’s going to reveal itself in 2023 sometime, and that’s what you need to be doing.’ The reality is, the likes of Bezos, Musk and Branson have a proven ability in spotting multi-decade growth opportunities, and all three are now focusing in on one specific trend: Space. While Bezos’ and Musk’s space companies remain private and Branson’s Virgin Galactic offers only narrow exposure to the sector limited to commercial space flight, the recently public Seraphim Space Investment Trust offers well diversified exposure. Interestingly, its recent initial public offering (IPO) attracted financial backing from Branson himself.
 
The space technology fund was launched in 2016 and has invested in over 50 space start-ups, achieving a return of 30% per annum to date. The trust has a wide funding range with potential investment from US$1-25m and has access to an extremely active global deal flow with up to 50 new opportunities analysed every month. Investment directly into Seraphim Space throughout the first half of 2021 equates to 85% of funds raised throughout the entirety of 2020, and the sector on aggregate rocketed by £4.7bn.
 
Amidst the excitement and noise surrounding the space industry, many are still in the dark about the underlying companies and opportunities driving the sector. Contrary to the image of fuel guzzling rockets flying billionaires into orbit at the expense of mass carbon emissions, opportunities in space offer solutions to global issues such as food scarcity, traffic congestion, climate change and natural disaster preparation. Furthermore, with 50% of the world currently unable to connect to the internet, satellite constellations will enable billions of people to improve their education, health and standards of living. James Bruegger, Chief Investment Officer of Seraphim Space, said in the Q4 2022 report: “Space tech is at the nexus of mega-trends that will define societal change over forthcoming decades and is now playing a unique role in addressing the world’s most pressing problems. Radical advances in the space sector mean a data and connectivity tsunami is transforming the world as we know it, driving the next major paradigm shift in the global economy.” Drilling down into Seraphim’s portfolio is what really offers a concrete perspective on the wide-ranging potential of the sector.
 
In the artificial intelligence space, ChAI, a London-based start-up, uses alternative space data to give commodity price expectations, mitigating the negative cash flow impacts of price risk for buyers and sellers of commodities. Alternative data is sourced from satellites in orbit which use advanced imagery to look at change detection and volumetrics of mines and smelters, as well as tracking movements of commodities by freight around the world. Machine learning is then used to determine a weight for each ‘input family’ of information, which predicts a price with associated confidence intervals across various time horizons. ChAI suggests that such price predictions enable users to capture an average increase in margin of 25% of commodity spending.
 
Another company in the portfolio, Nightingale Security, builds and deploys autonomous drone systems that protect critical infrastructure for Fortune 500 companies. Such drone systems operate consistent patrols in all weathers to respond to alarms, transmit live video streams and report on any maintenance needs recognised by the system. Through an extensive network of propriety infrastructure, drones and base stations communicate and collaborate with each other to ensure that drones remain charged, covering each other to maintain flight if one drone runs low on power.
 
In the realm of climate change is a holding in Satellite Vu, an earth observation company using a satellite constellation with advanced infrared sensors providing high resolution thermal imagery to monitor the temperature of buildings across the globe. This offers information regarding the activities taking place within buildings, energy efficiencies and carbon footprints. Temperature information transmits in near real time and can identify where energy wastage is occurring, as well as whether businesses declaring net zero are as efficient as they claim.
 
Looking forwards, Seraphim Space Investment Trust offers attractive targeted annualised returns of 20%. An impressive portfolio of holdings with a proactive approach for investing in young, but exciting companies offers a promising case for investment. Despite this, it is important to remember that risk can go both ways in new markets. Independent Wealth Consultant Adrian Lowcock recently commented to Portfolio Adviser: “Investors need to balance the appeal of accessing a new frontier with pragmatism. It is critical not to get too caught up in the story and ‘unlimited’ potential as this will likely take decades to be realised.”
 
“This has the potential to be a hugely exciting area for many years to come but we can be certain that there will be many bumps on the journey towards the launch pad, let alone the stratosphere,” he added.
 
This article was taken from the September 2021 Market Insight. To subscribe to our investment publications, please visit www.redmayne.co.uk/publications.
 
Please note that this communication is for information only and does not constitute a recommendation to buy or sell the shares of the investments mentioned.
 
Seraphim Space Investment Trust

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