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Space the new frontier for investors as ETF and investment trust launch
The addition to the London market of an investment trust and an exchange-traded fund which invest in companies involved in space activities reflect the theme’s move into the mainstream.
Seraphim Space Investment Trust is hoping to raise £150 million to launch the world’s first listed fund investing in the space sector. This comes after the Procure Space ETF (YODA) joined the London Stock Exchange at the start of June.
While sending passengers into space has caught the public’s imagination, it’s the ongoing commercialisation of the sector that’s interesting investors.
The cost of building satellites, which are becoming increasingly lighter and smaller, and sending them into orbit has reduced dramatically in recent years, opening up a wide range of potential commercial applications.
The difference between the space-focused investment trust and the ETF is that the trust will invest in unlisted companies, while the ETF only holds listed stocks.
The trust will raise £150 million in new investor money and incorporate assets in Seraphim’s existing fund, worth £100 million. It has invested half the money in 20 space-related firms, with many valued at more than $1 billion.
Two of its portfolio companies are planning stock market floats in the US by merging with SPACs. Spire Global, a provider of satellite-based global weather forecasting and analytics, and Arqit, a UK-based quantum computing encryption company, will be valued at $1.4 billion apiece if their US floats go ahead. The trust is targeting an eye-catching annual return of 20%.
BESPOKE SPACE INDEX
Meanwhile the Procure Space ETF, which tracks a bespoke index, only invests in companies that are listed on the stock market, with 80% of the index made up of stocks that derive over 50% of their revenue from space-related businesses.
To be included in the index a firm must have a market value of more than $100 million and the ability for the shares to be easily bought and sold with at least $1 million traded in its shares each day.
Since inception in April 2019, the US-listed version of the ETF is up 22.8% which lags behind a 39.7% rise for the MSCI World index over the same time period. The ongoing charge of 0.75% is quite high for an ETF but reflects the specialised nature of the vehicle.
One well-known investor in space-related stocks is Baillie Gifford-run investment trust Scottish Mortgage (SMT).
Speaking in an investor update in April, co-manager Tom Slater highlighted unquoted SpaceX, created by Tesla founder Elon Musk, and said that as the cost per kilogram of cargo into space gets lower and lower, it opens up ‘huge new applications’.
He added: ‘One of the first is telecommunications, so moving away from having mobile phone masts to having communications access to doing that from satellites. We think there’s all sorts of applications that this enables.’