Baillie Gifford's Schiehallion fund explores $500m 'C' share issue

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Schiehallion co-manager Mark Urquhart

Baillie Gifford’s Schiehallion fund will “attract significant demand” from investment trust buyers should its proposed ‘C’ share issue materialise, Numis analysts have predicted.

The board of Schiehallion said on Thursday (6 January) it was considering raising up to $500m via the proposed issue of a ‘C’ share class aimed at both institutional and professional investors.

A prospectus is set to be published by the end of March with shares likely to start trading before the end of April, should it proceed with the raise. It had previously noted in October it would consider increasing its capital base.

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With a low-key IPO in March 2019 that raised $477m (£361m), Baillie Gifford aimed the fund at a small group of institutions, previously non-traditional investment company buyers, including the State Board of Administration of Florida, which owns 40% of shares.

With ordinary shares currently trading at $1.42, a 12% premium to net asset value, Numis analyst Andrew Rees said he would not be surprised to see the ‘C’ shares, which will be issued at $1, “attract significant demand from more traditional buyers given the strength of Baillie Gifford reputation and recent performance”.

Schiehallion makes long-term minority investments in later-stage, private businesses with a value of at least $500m at the time of the initial investment that have the potential to become publicly traded.

The focus is on companies with transformational growth potential” that have scalable business models, with robust competitive advantages and strong management teams.

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Top holdings currently include payment firm Stripe, mobile games developer Scopely, prescription glasses retailer Warby Parker, personalised medicine provider Tempus Labs and Elon Musk’s aerospace manufacturer SpaceX.

Rees said: “We believe it is an interesting approach and is run by Baillie Gifford who is a well-respected investor in this area, giving them access to dealflow.

“In addition, costs are significantly lower than a traditional private equity fund, with no performance fees and a base fee of 0.9% on net assets up to $650m, tapering down to 0.80% on assets up to $1.3bn, and 0.70% above $1.3bn.”