During the month, as part of our regular manager engagement, we spoke with Core Fund Manager Caledonia to review their recommendations. As a result, we have added two new positions to the portfolio:

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‍Cameco (CCJ.NYSE)

Nuclear power generation is entering a major long-term growth phase driven by 1) increasing demand for clean, scalable baseload electric power generation; 2) a global AI arms race that requires scalable power generation to effectively compete; and 3) a rising affinity for nuclear as a viable source of power. In addition, public sentiment has shifted meaningfully in favour of nuclear energy globally, with large majorities now supporting the increased use of nuclear energy. After years of underinvestment, nuclear fuel supply capacity is nowhere near the levels needed to meet expected demand, creating a structural supply deficit that is already leading to significantly higher prices for nuclear fuel.

Cameco is the largest pure-play commercial nuclear fuel provider with tier-1 operations across the nuclear fuel cycle and in geographically and geopolitically advantaged areas (predominantly Canada and US). As such, Cameco is uniquely positioned to benefit from this supply-demand imbalance.

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‍Royalty Pharma (RPRX.NASDAQ)

Royalty Pharma is the largest acquirer of pharmaceutical royalties, accounting for 79% of large-scale royalty transactions over the past decade. The company provides a lower-risk gateway into life sciences innovation by funding late-stage development and FDA-approved drugs in exchange for future royalty streams. Royalty Pharma leverages a highly experienced team, extensive industry data compiled over decades, and proprietary information to optimise their diligence processes. This, along with a material scale advantage and access to low-cost debt, has resulted in multiple large-scale deals ($500+ million) driving market-leading diversification and competitive advantages.

Royalty Pharma recently internalised its management company, further aligning leadership with shareholders. The business generates approximately $2.5 billion in annual cash flows, which it allocates to new deals (targeting ~20% incremental ROE), share repurchases and dividends. The company has authorised $3 billion of share repurchases of which $2 billion is planned for 2025.

Royalty Pharma currently trades at approximately 1.4x book value. If it compounds its book at ~15% per annum, and valuation multiples remain steady, this could translate to a similar rate of share price growth over time. The company’s enterprise value is 12.5x cash flow, and it pays a 2.5% dividend yield offering rare risk-adjusted returns as a non-cyclical business that performs well during broader equity market weakness.

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These two new positions replaced Just Eat Takeaway and Liberty Media Formula One.

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We thank Caledonia for their ongoing support as a Core Fund Manager, and look forward to seeing how these new portfolio holdings perform in the fund.