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Life on Mars?

Life on Mars?

Earlier this year, Elon Musk, the ambitious yet sometimes controversial Tesla and Space X CEO, announced plans to build a city on Mars that could populate one million by 2050.

Space X are the first private entity to launch 2 Nasa astronauts to the International Space Station (ISS) which set off on Saturday 30th May. Elon Musk, innovative and ambitious CEO of Tesla and Space X, earlier this year announced plans to build a city in Mars that could populate 1m people by 2050.

Some might see this as improbable. Others might see this as tempting given the current health and economic crisis since the outbreak of coronavirus.

Could multi-planetary human life become a reality in the next 30 years? If so, what financial infrastructure would be required on Mars for the arrival of human life?

Life on the red planet

As well as many other necessities, humans would need a mix of property types where they could live and work. Funds would also be required to pay for infrastructure, including the development costs to build such property, so it’s safe to assume Mars would require a monetary system, similar to what we have here on Earth.

As such, property could be funded and owned directly by an individual or corporate entity.

Alternatively, invested capital held in funds could be used. Take investment trusts as an example. These public companies seek to make money for their shareholders by buying and selling shares in other companies or assets.

Establishing such a trust would allow humans living on Mars to become shareholders with a board of directors and a fund manager appointed either internally or externally. Investment trusts are closed-ended funds listed on a stock exchange and therefore tradeable on a daily basis allowing the investor to purchase shares in the limited company.

Although during market downturns, the share price can be lower than the net asset value of the fund, this is known as trading at a discount.

Investment trust history

The history of investment trusts is fascinating.

Many investment trusts, particularly in Scotland, date back over 100 years. They played a huge part in investing in infrastructure and technology. Take the Baillie Gifford-managed Scottish Mortgage Investment Trust, launched in 1909 to lend to rubber plantations in the Far East.

The fund still has a global remit today, investing in a range of technology-based businesses, including a sizeable holding in Elon Musk’s very own Tesla.

Another investment option to fund property development on Mars would be a Unit Trust. Instead of owning shares, investors would own units and the investment would be open-ended. An in-house fund manager would be directly appointed by a board of trustees to manage the investment. A Unit Trust is an open-ended fund. Property is not always a compatible asset to hold in an open-ended fund, especially during times of downturn. We have seen recently, since the outbreak of coronavirus, that many open-ended Unit Trust funds suspended trading due to high outflows. This makes holding property in an open-ended fund very illiquid during market downturns, compared to Investment Trusts, i.e. closed-ended funds.

As far-fetched as it seems, perhaps investment trusts will play a part one day in the investment of Space X’s mission to put human life on Mars.

By Kevin Mackenzie
Published in The Business Supplement, The Press & Journal on 19 June 2020