Private Equity Funds-an opportunity.

14th Mar '23 by Charles Mitchell

3 comments 1464 reads

At the moment Private Equity funds have moved to what seems to me extraordinary discounts.

Private equity investments present a huge opportunity - could be distressed PLC's selling a profitable subsidiary,- through to a joint investment into a maybe VC company that is going into the next stage of development. These funds do not always look to exit through an IPO- many sales on to trade buyers.

Despite the discount increasing I have done well over the last 4 years with Oakley Capital investments(up75% despite widening discount)- I do not buy and sell these funds as they are a long term holding- just top slice when it becomes a higher % of my portfolio than I feel comfortable with.

I hold TEK capital- which is more Venture capital than Private equity- there is a big distinction. Should have sold this at its peak of 35p and taken profit on a lucky punt 12 months ago.. But holding on as it does have a couple of interesting businesses.

Looking at this sector it is important to make sure the fund is private equity rather that venture capital- a huge difference in risk and investment approach.

Having just watched a presentation from Pantheon International I will be investing. I also have a monthly ISA investment going into CT Private Equity Trust.

For any one interested in researching the AIT list of PE funds is below

3i Group Plc

abrdn Private Equity Opportunities Trust plc

Apax Global Alpha Ord

CT Private Equity Trust PLC

Dunedin Enterprise Investment Trust

HarbourVest Global Private Equity

HgCapital Trust Plc

ICG Enterprise Trust Plc

JPEL Private Equity Ltd

Literacy Capital PLC

LMS Capital plc

NB Private Equity Partners Class A Ord

NB Private Equity ZDP 2024

Oakley Capital Investments Limited

Pantheon International PLC

Princess Private Equity Holding Limited

Symphony International Holdings

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Trader Jack

27th May '23

Hi Charles - I agree the risk / reward ratio looks good. I hold OCI & HGT & now looking to add another. I like stocks with divi’s in my ISA so tempted by CTPE & APAX. Would be interested in any other views.

Edward Croft

29th May '23

There's a lot to be concerned about regarding private equity in general. I don't know these funds so well, but the discounts are probably justified. I would refer you to the work of Dan Rasmussen and Cliff Asness regarding private equity, as well as the book Plunder - summarised in this podcast by Grant Williams.

All these links are generalisations about private equity, but Rasmussen has made a strong case for private equity returns being no better than leveraged public small-cap value. After all, many private equity funds simply buy small-cap value stocks and increase their leverage. Given UK small caps are so undervalued, and the target of private equity buyouts, it's fairly straightforward to believe you will do better in by gearing yourself in these assets directly than in high-fee funds taking them private with leverage.

Nonetheless, I have two old friends who are partners at Oakley Capital, one of whom was a co-founder here at Stockopedia and is a trusted advisor on the board. I'm unsurprised at their outperformance over many years, as they do tend to make private-to-private transactions, and have made some extremely shrewd and fruitful investments.

So my generalisations are more about the asset class as a whole, and especially from a more global perspective. In the UK, given valuations in general, there's probably little doubt that UK private equity has a pretty good tailwind even if interest rates have now normalised.

Brilliant Leader

2nd Jun '23

There was a very good presentation/interview a couple of months ago with Hamish Nair of CT Private Equity Trust (LON:CTPE) (I hold). One particularly interesting point was that only 6% of realisations were through IPOs, the balance being split between PE-to-PE and trade sales.

Private Equity Funds-an opportunity.

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Charles Mitchell

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