The unusual opportunity in PE Investment Trusts
In my recent hunt for capital gains, private equity investment trusts are a sector that have popped up, and in which I have started investing. I’m a relative newcomer to the sector, seeing as I’ve mostly focused on single stocks during my career, but I thought I would share an overview of my findings with you.
Firstly, why might you care about this sector? Well, I think it offers a range of interesting features:
Diversification away from the public equity markets, which might be helpful as the S&P500/Mag 7 nearly always appear overvalued to me, and I already have plenty of exposure to UK single stocks..
Many of these trusts have historically offered returns that are competitive with the broader public stock markets.
These high returns might be expected to continue long-term as they should benefit from the small-cap premium (the investee companies are often SMEs).
Where we are looking at HMRC-authorised investment trusts, they enjoy tax privileges, i.e. exemption from taxes on chargeable gains (please do your own due diligence on this topic!).
Many of these trusts trade at wide discounts to NAV, and have management teams who are keen to narrow these discounts back to levels at which they traded historically.
For every advantage, I’m sure you can probably find a disadvantage or a potential risk - for example, there is no guarantee that the discounts to NAV will narrow from current levels. But still, I do think that it’s a sector that has the potential to beat the stock market indices, while taking less risk than single-stock bets. So for a relatively conservative section of my portfolio, I think it has a role to play.
So with that said, here is my overview of private equity investment trusts. I’ll start with the smallest and most obscure, making my way towards the largest and most blue-chip trusts.
(Please note that I’m leaving out 3i (LON:III) from my analysis as its top holding is responsible for 72% of NAV. Therefore, while it is technically an investment trust, it doesn’t offer the diversification that I’m looking for when making a new investment in the sector.)
LMS Capital (LON:LMS) (£17m)
The strategy at LMS is to invest in “companies that generally require a level of management attention which larger funds are unable to support or are too complex for direct investment by individual family offices or individual investors”. NAV as of March 2025 was £35m, double the current market cap, with £12m of cash and a portfolio said to be worth £23m. Unsurprisingly, given the size of the trust, this is not a particularly well-diversified offering - one investment is reported to have a value of £9m, with another valued at £6.6m.
JZ Capital Partners (LON:JZCP) (£122m)
This gives access to “a diversified portfolio of US and European microcap companies and US real estate”. The April 2025 factsheet shows that its top holding is an office building in Florida with a value of $27.6m, or 16% of the fund. The net asset value per ordinary share was $4.07 which at the latest exchange rate equates to 302p, versus a share price of only 202p. While personally I’m not looking to make a real estate investment, and I’m also looking for trusts with more diversification than this, the value on offer may appeal to some.
Symphony International Holdings (LON:SIHL) (£143m) (trades in USD)
This gives exposure to Asian economies “by investing in companies in particular high-growth sectors - primarily healthcare, hospitality, lifestyle branded real estate, and new economy ventures”. Its annual report for 2024 lists five material investments, with 16 “non-material” investments, so diversification is likely to be very limited. But for completeness, I should note that it had a NAV per share as of December 2024 of $0.8533, versus a current share price of only $0.36.
Literacy Capital (LON:BOOK) (£246m)
This is “focused on investing in and supporting UK businesses and helping their management teams to achieve long-term success”, with a charitable objective. According to the portfolio overview as of April 2025, its top 5 investments accounted for 68% of NAV, with its top holding being 31% of NAV. So again, this is an offering where diversification is not its strong suit. NAV per share was reported at 511.5p and the shares trade at a relatively modest 15% discount to that level, currently at 436p.
CT Private Equity Trust (LON:CTPE) (£327m)
This is a Columbia Threadneedle product, with a portfolio of “private equity funds and stakes in individual private businesses, which have been carefully selected with a view to generating capital growth over the medium to long term”. For those who care about awards, It won the “Private Equity and Growth Capital” category at the Investment Company of the Year awards in 2023. Its disclosure standards are very good, with portfolio details easily found on its website. The top holding is worth 3.2% of net assets, and the entire top ten is worth 21.8%. So I would rate the diversification here as very good. Net asset value as of March 2025 was 693.4p, and it trades at a generous 34% discount to this. It also pays a dividend with a yield of 6%. So for those who are interested in some yield, this could be worth examining in more detail.
Partners Private Equity (LON:PEY) (£569m) (trades in EUR)
This is managed by Swiss PE firm Partners Group, with the objective “to provide shareholders with long-term capital growth and an attractive dividend yield leveraging on Partners Group’s extensive expertise and global presence to invest in a diversified portfolio of private companies”. It has 70 investments, of which the top 10 are responsible for 48.9% of NAV. The top two are each worth 8.5%. So diversification here is good, although not as impressive as CTPE. Its April NAV was €14.05, while the shares trade at only €9.64, offering a 31% discount. This one also offers a chunky 7% dividend yield.
Apax Global Alpha (LON:APAX) (£572m)
This is run by British PE firm Apax Partners. It has an equity portfolio of “hidden gems”, “mostly private companies, many of which were acquired by the Apax Funds in control buyouts not accessible to shareholders elsewhere”. It also has a small debt portfolio. Its top three holdings are each worth 5% of NAV so again I would rate the diversification here as quite good. NAV per share for March 2025 was reported at €2.38/£2.00 and so the shares at 118.6p are trading at a discount of 40% to this. The yield is over 9% and it has been buying back its own shares.
NB Private Equity Partners (LON:NBPE) (£646m)
This one is managed by Neuberger Berman, the American investment firm. It “invests directly in private companies alongside some of the world’s leading private equity managers”. Its portfolio of 90 companies has been “handpicked by Neuberger Berman”, and is primarily focused on North America. The top holding is worth 7% of NAV (it happens to be Action, 3i’s major investment), and I calculated that the top ten holdings add up to c. 39% of NAV. So diversification is pretty good here. NAV was last reported at £20.43, versus a share price of £14.02, and it has been buying back shares. The dividend yield is c. 5%.
Patria Private Equity Trust (LON:PPET) (£843m)
Patria is a $40bn investment firm, and PPET is its Europe-focused investment trust, investing in PE funds and co-investments with PE managers. It offers diversification across 616 underlying companies, with the top 100 making up 64% of NAV (FY24 Annual Report). The largest single exposure is again Action, 3i’s major investment, which accounted for 2.4% of NAV. So the diversification here is excellent. NAV at the end of April 2025 was 784p, versus a current share price of 562p, and it is buying back its shares. The yield is 3%.
Oakley Capital Investments (LON:OCI) (£855m)
This is managed by PE firm Oakley Capital - there’s a clue in the name! It offers “a diversified portfolio of fast-growing European private businesses”. There is a sector focus on Technology, Consumer, Education and Business Services. Historic performance is excellent but it currently offers less diversification than some other trusts of similar size: the largest holding is worth 12.6% of NAV, and the top ten are worth 61%. Like others in the sector, it is buying back its own shares (NAV is 707p, versus a share price of 496p). This one is particularly suited to those seeking capital gains, as there is no dividend.
ICG Enterprise Trust (LON:ICGT) (£869m)
This one is managed by Intermediate Capital (LON:ICG) (again, a clue in the name), which is a large global asset manager. This trust invests “primarily in profitable, cash-generative private companies in Europe and the US”, and offers excellent diversification: the top ten holdings add up to less than 20% of NAV. It pays a modest dividend (3%) and is buying back its shares. NAV per share was 2,073p as of Jan 2025, and the current share price is 1,372p.
Pantheon International (LON:PIN) (£1.37bn)
(At the time of publication, Graham has a long position in PIN.)
This is the one where I was happy to take the plunge. It’s a trust “that invests in a diversified portfolio of private equity assets managed by third party managers across the world”. It pays no dividend and has no intention of doing so. Instead, it has focused on buybacks with its shares trading around 306p currently vs. NAV per share of 501.2p. Its long-standing co-manager Helen Steers MBE has recently announced that she will retire at the end of 2025, and the company has released its “succession plan” RNS. The trust will continue to be managed by the other co-lead manager, Charlotte Morris. The diversification of this trust has really impressed me: the top ten holdings add up to less than 10% of NAV.
Harbourvest Global Private Equity (LON:HVPE) (£1.76bn)
This one invests “exclusively in funds managed by HarbourVest Partners, an independent and global private markets asset manager with over 42 years of experience”. It is extremely well diversified (top ten holdings less than 8% of NAV) and pays no dividend, making it ideal for those seeking capital gains. It is also buying back its own shares: NAV was last reported at £41.67, vs the share price of £23.90. This is currently my second favourite PE trust.
HgCapital Trust (LON:HGT) (£2.29bn)
Hg is a London-based PE firm, and this is its trust: it invests in “a diversified portfolio of private equity investments managed by Hg”. Diversification is similar to OCI: the largest holding is 15% of NAV, and the top ten add up to 57% of NAV. So it does offer a degree of diversification, although less than some other trusts. It pays a small dividend although the amount paid has been somewhat unpredictable, and it is not currently buying back shares. The lack of a buyback makes sense as NAV per share was last reported at £5.31 (March 2025) and the current share price is only 8% lower than that, at £4.88.
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I hope you’ve found this interesting! As you can see, I’ve not been trying to do a deep dive on each of these trusts - my main concern has been to understand their strategy, their level of diversification, their buyback/dividend policy, and their pricing relative to NAV. I think that’s enough to get started, and to hopefully give you some ideas that you might wish to follow up on in more detail. I’d be very curious to hear your thoughts!
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33 comments
Hi Graham,
I really enjoyed your write‑up above back in June and was reminded to revisit it after listening to the latest Money Makers podcast featuring Jim Strang, chairman of HGT. Your overview of the sector was excellent, proved very useful and it's been remiss of me not to thank you.
At the time I decided to act on your observations and added positions in Apax Global Alpha (LON:APAX^I25) and your first and second favourites, Pantheon International (LON:PIN) (upping from a small position already held) and Harbourvest Global Private Equity (LON:HVPE) All have done well (see below) and I’m grateful for the clarity of your analysis which helped me navigate a sector I hadn't previously paid a great deal of attention to.
Adding to those posters on the Friday's DSMR thanking you I would include myself in surely the vast majority of subscribers who are very appreciative of the work you and all of the Stockopedia team do on this site not to mention the contributions of the majority of subscribers, all of which is of great value to me. Using what is available here on Stockopedia wisely can easily pay the price of admission and then some.
Out of interest I thought I’d ask AI to look at how all the above Trusts performed since your article and the results are as follows.
For context, between 18 June and 21 November 2025:
• FTSE All‑Share rose from 4,801.26 to 5,132.26, up +6.9%.
• S&P 500 rose from 5,980.87 to 6,602.99, up +10.4%.
Here’s how the trusts ranked by total return over the same period:
1. Apax Global Alpha (APAX) — Trust acquired at 165p vs 117p in June (+41%).
2. HarbourVest Global PE (HVPE) — Share price up 2,390p → 2,995p (+25%).
3. Pantheon International (PIN) — Share price up 306.5p → 362p (+18%).
4. NB Private Equity Partners (NBPE) — Price up 1,402p → 1,564p (+11.6%) plus ~35p dividend (total +14%).
5. ICG Enterprise Trust (ICGT) — Price up 1,372p → 1,498p (+9.2%) plus ~40p dividend (total +12%).
6. Oakley Capital Investments (OCI) — Price up 496p → 558p (+12.5%).
7. Patria PE Trust (PPET) — Price up 562p → 608p (+8.2%) plus 8.8p dividend (total +9.8%).
8. CT Private Equity Trust (CTPE) — Price up 450p → 472p (+4.9%) plus ~20p dividend (total +9.3%).
9. Partners PE (PEY) — Price up €9.64 → €10.00 (+3.7%) plus ~€0.35 dividend (total +7.3%).
10. Symphony Intl Holdings (SIHL) — Price up €0.37 → €0.39 (+5.4%).
11. HgCapital Trust (HGT) — Price down 488p → 472.5p (–3.2%) partly offset by ~12p dividend (total –0.7%).
12. JZ Capital Partners (JZCP) — Price down 202p → 189p (–6.4%).
13. LMS Capital (LMS) — Price down 18.14p → 16.3p (–10.1%).
14. Literacy Capital (BOOK) — Price down 434.9p → 372p (–14.5%).
Thanks again, Graham — your observations were timely and helpful, and APAX/PIN/HVPE have been excellent additions. Now, when is your next piece scheduled? :-)
Edit: to add that I think PIN, HVPE and possibly PPET are still a buy at today's prices but open to comments from others.
On private equity one might want to read what Daniel Rasmussen has to say about them (nothing good) in his recent book "The Humble Investor" which he discusses with Merryn Someerset Web on her Bloomberg podcast, Merryn Talks Money August 16. It's on YouTube, Apple Podcasts and elsewhere.
PPET released their half year report today. An interesting read as it gives some general guidance on the PE landscape and outlook.
Also read on another forum (advfn) an interesting take on European focused trusts. The idea was they have a significant edge on the relatively undervalued European PE space as the US based PE funds have language and cultural barriers. Not sure how true but food for thought.
This is a helpful roundup. One point you omitted is that JZ is in wind-up mode which should bring forward the elimination of the discount.
Belated thanks, Graham. Your article has significantly added to my (very limited) knowledge of equity investing.
The only trust in this field that I currently hold is Oakley Capital Investments (LON:OCI) . Of the rest, the one that stands out for me is ICG Enterprise Trust (LON:ICGT) . It has a good 5 and 10-year performance, a 35% discount to NAV and is buying back a few of its shares. In addition, the NAV only ever seems to go up! If you or anyone else can tell me what I'm missing, I'd be grateful. If not, don't worry because I won't be putting my shirt on it.
Also worth examining the strategies of some of these investment trusts. For example although HgCapital Trust, Oakley Capital and Literacy Capital apparently have few similarities, they all, to a greater or lesser extent, include some investments which are serial acquirers so a significant part of their portfolio can growth inorganically. I think this is one factor which has helped in long term success of HgCapital Trust and Oakley Capital but perhaps we need to wait a bit longer before we can say the same of Literacy Capital. I own all three for this reason.
Hi Graham,
Thanks for this article. I am less keen on Pantheon International (LON:PIN) and Harbourvest Global Private Equity (LON:HVPE) as I think they are very difficult to understand given the 'fund of funds' investment profile. Very hard to look through.
The best site for Investment Trusts, apart from Charles Mitchell's Discussion Board (here on Stocko), is to keep an eye on the AIC's website. https://www.theaic.co.uk/
The performance of fund of funds style Trusts has been mixed over recent years. 5 year record of Pantheon International (LON:PIN) is a total return of 54.8% and Harbourvest Global Private Equity (LON:HVPE) is similar at 54.2%.
I much prefer those Trusts which are more focused on driving results from individual holdings and less diversified. I tend to have around 10% of my invested funds in this area, and have focussed on Oakley Capital Investments (LON:OCI) and HgCapital Trust (LON:HGT) for this sector. The way I look at it is even if HgCapital Trust (LON:HGT) largest holding is 15% of its portfolio, that only translates to 0.75% of my invested wealth (on a 5% portfolio position).
I routinely take larger risks on other single holdings, such as Spectra Systems (LON:SPSY) and Volvere (LON:VLE) which are around 7.5% of my invested wealth individually.
Oakley Capital Investments (LON:OCI) has delivered very strong returns over the last 5 years of 157% and HgCapital Trust (LON:HGT) has closely followed that at 126%. It is rare to buy HGT on a discount, and the current 8% discount quite possibly represents an excellent long term opportunity.
If I had to choose just one Trust, it would be Oakley Capital Investments (LON:OCI) . Their reporting is excellent, winning awards in recent years for investor relations. They are led by Peter Dubens, who holds a huge 11.5% of the stock and routinely makes chunky purchases. They are European focused, so give me a good hedge for my Pershing Square Holdings (LON:PSH) US focussed trust holding. They tend to be the first investor that founder-led entrepreneurs turn to, often taking shareholdings in private companies without competition from other PE funds.
Personally, I have learnt to ignore the charges on these Trusts and just focus on the total return that you can get when held over the long term.
I don’t think the charges are anywhere near as high as some that have been posted here today but it needs someone more clued up on charges than I am, to confirm that. Like OldSchool05 I focus on the investment case for the Trusts I hold and seek out and their performance.
Private Equity Trusts have been out of favour for a good while now but that’s throwing off some tempting buy opportunities. I also hold Oakley Capital Investments (LON:OCI) and bought in 2019, and it’s in the Virtual Investment Trust portfolio, published at the beginning of each month by poster number33 on the Investment Trust thread.
HgCapital Trust (LON:HGT) looks very tempting now. For years it traded at a premium. OK. At 7% the discount is tiny compared with the huge discounts available on some of the others. But why did it trade at a premium for so long? Excellent performance along with never having to dispose of an investment for less than they paid for it! Note though the poor 1 year share performance. That’s surely temporary?
OldSchool05 posted a link to the AIC website.
The AIC is the trade body for Investment Trusts and was founded in 1932. It covers all the Trusts and sectors and there’s a wealth of information there.
The link below is for all the Private Equity Trusts to see at a glance must know figures and comparisons for all of them, and allow one page. Click on each Trust highlighted in red to bring up a lot more information just for that Trust. (The exceptions are the very few Trusts that don’t subscribe to AIC).
The same can then be done from that link using the appropriate search button for every Investment Trust sector and every Trust in that sector.
An alternative quick way to find those pages is to Google AIC Compare Companies.
Highlighting the link below also shows the extraordinary gains for 3i (LON:III) . But that success was thanks to one stunningly successful investment that is now a huge chunk of their portfolio. It’s too late to invest now. 3i (LON:III) is trading at a ludicrous premium to NAV.
https://www.theaic.co.uk/aic/f...
Finally, another sector where Trusts that used to trade at Premiums but now traded at big discounts are the Renewable Infrastructure Trusts. They are difficult to assess but the sometimes double digit dividend yields (e.g SDCL Efficiency Income Trust (LON:SEIT) 14% dividend ahead of recent share price bounce) ) along with sector consolidation likely, makes them worth checking out too. Some are getting regular coverage on the Investment Trust threads here run by Charles Mitchell. I hold several of them.
Here’s the AIC link for all the Renewable Energy Infrastructure Trusts:-
https://www.theaic.co.uk/aic/f...
Great overview Graham. PE trusts are often covered in the monthly investment trustthread- Junes Monthly There a re a couple of very specialist trusts - Augmentum Fintech (LON:AUGM) and Hydrogenone Capital Growth (LON:HGEN) . Both trading on large discounts and both boards have said they are aware of the need to address the discount. Time will tell. Fees are always complex with PE trusts, some have a bonus above a certain return. Also many of them invest in other PE funds rather than direct, so can be difficult to get to the underlying portfolio. I am a long term holder in Oakley Capital Investments (LON:OCI) which has done OK andHGEN and AUGM where the asset performance has not been too bad , but share price fallen a lot due to the widening discount.
I. should. have said re the AIC site, the performance figures for the PE sector the aiC use are totally skewed by the crazy (in my opinion) value attributed to 3i (LON:III) . Strip. out III and you get a better picture of the winners and losers.
3i is extremely overvalued and heading for a fall at some point, in my opinion. Not only is it on a 60% premium, but Action (which makes up the bulk of the port) is valued on a very high multiple which means the NAV is inflated. Just my view and might be completely wrong.
My view entirely .
Thanks for the article, its very much appreciated. The Private Equity market seemed huge and the fund charges varied greatly between managers so I accepted I would probably drive myself crazy trying to research this field in detail and went looking for PE ETFs, of which there are relatively few. Eventually I plumped for iShares Listed Private Equity UCITS ETF USD D (LON:IPRV) which may be of interest. Its charges appear lower than actively managed funds, it offers a reasonable dividend payment and has returned 65% over 5 years (higher if the divi is included). Might be worth considering for those hard pressed for time to conduct extensive research.
I think you may have unintentionally highlighted Grahams point that it may be worth paying high fees in this sector. Whilst the ETF does have low fees itself, it basically invests in other companies/funds, so they are (to my mind) a type of "fund of funds" (but with lower published fees). All the funds they invest in will also be charging fees. It's performance puts in in the low end of the top ten PE ITs according to Trustnet. Probably a lot of their performance is due to 3i being their number 1 holding (8.5% weighting).
I've never considered this but can ETFs have a premium/discount to NAV or are they priced at NAV? this could be a bonus for PE ETFs if they trade at NAV.
Hi Dave. I'm under the impression that significant premiums or discounts to NAV are rebalanced back to NAV by a process called "creation-redemption" which involves creating or withdrawing the number of ETF shares available in the market. Not quite sure how it works, or how efficient it is during times of extreme market volatility.
Thanks. For info I got this from Gemini AI that confirms what you said.
ETFs can trade at a premium or discount to their Net Asset Value (NAV), similar to investment trusts, although the mechanism and typical deviations tend to be different.
Here's a breakdown:
ETFs (Exchange-Traded Funds):
* NAV: The NAV of an ETF represents the value of its underlying assets (stocks, bonds, etc.) minus liabilities, divided by the number of shares outstanding. This is calculated at the end of each trading day. Many ETFs also provide an indicative NAV (iNAV) throughout the trading day, which is an estimate of the real-time value of the underlying holdings.
* Market Price: ETFs trade on exchanges like individual stocks, and their market price is determined by supply and demand during trading hours.
* Premiums and Discounts:
* Premium: When the ETF's market price is higher than its NAV.
* Discount: When the ETF's market price is lower than its NAV.
* Arbitrage Mechanism: This is the key difference from investment trusts. ETFs have a unique "creation/redemption" mechanism involving Authorized Participants (APs).
* If an ETF trades at a premium, APs can create new ETF shares by buying the underlying assets and delivering them to the ETF issuer in exchange for new ETF shares. They then sell these new shares on the open market, profiting from the premium and increasing the supply of ETF shares, which pushes the market price back towards the NAV.
* If an ETF trades at a discount, APs can buy ETF shares on the open market and redeem them with the ETF issuer for the underlying assets. They then sell these underlying assets, profiting from the discount and reducing the supply of ETF shares, which pushes the market price back towards the NAV.
* This arbitrage process generally keeps ETF market prices very close to their NAV in normal market conditions. Deviations are usually small (e.g., a few basis points).
* Reasons for deviations: While arbitrage keeps premiums/discounts tight, some factors can lead to temporary or slightly larger deviations:
* Market Volatility: In highly volatile markets, the arbitrage mechanism might not keep up perfectly, or the pricing of underlying assets might be less clear.
* Time Zone Differences: If an ETF holds assets that trade on exchanges in different time zones, the iNAV might be based on stale prices, while the ETF's market price reflects real-time sentiment.
* Illiquid Underlying Assets: ETFs holding less liquid assets (like some bonds or niche commodities) may experience wider premiums/discounts as the arbitrage process is less efficient.
* Trading Hours: During periods when the underlying markets are closed, but the ETF still trades, the ETF's price can deviate as it acts as a price discovery mechanism for the underlying assets.
In summary:
Both ETFs and investment trusts can trade at premiums or discounts to NAV. However, the arbitrage mechanism in ETFs typically ensures that these deviations are much smaller and more transient than those commonly observed in investment trusts, which have a fixed share count and whose market price is more directly influenced by investor supply and demand for their shares.
The ETF itself might not charge high fees but the PE funds it holds will all be charging those fees, so I wouldn't use that as a basis for holding it (although not necessarily a bad choice if you want diversified exposure to the PE sector)
Been drip buying Pantheon International (LON:PIN) since about 2001, over the last ten years, an annual return of 8.7%, though since covid the discount to NAV has been a lot higher on average than historically - seems to take a dive when the market goes down, bigger than the index, then takes a long time to pick up, a phase it is going through at the moment.
Thanks for this Graham.
Am I right in thinking there are very high annual fees involved with holding many of these and, if so, do you have a view on this?
Just checking on Interactive Investor it shows : LMS 7.12%, JZCP 6.67%, SIHL 4.85%, BOOK 2.79%, CTPE 2.81%, PEY 5.43%, APAX 3%, NBPE 4.16%, PPET 1.6%, OCI 8.84%, ICGT 1.92%, PIN 0.63%, HVPE 0.54% & HGT 5.82%.
(I hold PIN)
Following on from this, how do the annual fees get paid? Through withholding a portion of the dividend ?
I think the fees are taken from the capital which reduces the NAV. I hold (pleasingly) about half of the ones mentioned and the fee taking is all back room stuff.
Agree Icm
The charges issue seems to me like part of the obfuscation from our financial services providers to channel our investment choices and discourage investment in this area. If I recall correctly Halifax also list all these costs which put a friend off the sector some years back. Surely all that matters to us as investors are the SP, NAV and any yield. The rest is included in NAV.
Great thanks
My main view on fees is that I'm willing to view them as "worth it" if the total returns are high enough! Some of these trusts have generated excellent historical NAV per share growth, despite whatever fees have been paid. But of course it's a good idea to take a detailed look at the fees for any trust you're thinking about investing in. G
Agree not sure why private equity fees are always such a huge issue for investors - private equity is an expensive business but as long as they deliver good returns I'm happy to pay. I don't see many people complaining that they won't invest in, say, Apple or Microsoft because management salaries are too high - you just focus on the net profit once all expenses deducted and work from there.
Just be aware that there is a correlation between higher fees and higher performance - it gets very complicated.
Funds will charge an ongoing fee to cover their ongoing operating costs of being a listed entity - the so called OCF, plus potentially a management fee, but the real juice is in the performance fees.
There will be numerous underlying vehicles and the terms will vary by fund, but generally you expect to see the manager take a performance fee of 12-20% of aggregate profits once a hurdle rate on 8% has been exceeded.
So if they have lots of very profitable realisations they charge a higher performance fee. I am being slightly flippant, but selecting the ones that charge the highest fees may also result in you selecting the best performing funds....
The terms of their performance fees and OCF used to be in the KIID which was quite useful for a quick overview - now some of them have taken advantage of the the IT fees debate (the endless double counting argument) to remove them from the KIID and bury them away in the report & accounts.
The link in the Harbourvest Global Private Equity (LON:HVPE) to their Report & Accounts failed, and you'll spend half an hour trying to work out what HgCapital Trust (LON:HGT) charge after you've wasted 15mins trying to find the accounts on their website.
Are they making it easy for investors to observe fee levels? Not in some cases, and it is a bit naughty. But then do you see the Ts & Cs of FTSE 100 CEO's remuneration packages spelled out clearly on p1 of the accounts?
Just a note that some of these IT are fund of funds, such as Pantheon International (LON:PIN) and Harbourvest Global Private Equity (LON:HVPE) while others are listed private equity funds, such as HgCapital Trust (LON:HGT) and Apax Global Alpha (LON:APAX) . If your investing in a fund of funds platform, I suspect the fees will be higher, given that the underlying private equity manager typically takes a 2% management fee and 20% performance fee above an 8% hurdle on top of the fee for the fund of funds manager. Something to be aware of. The benefit is that the fund of funds ITs are more diversified given they invest in multiple private equity funds.
Nurzel, thanks for this. I should add that 33% of PIN's portfolio is co-investments. An explanation below for those who are new to the term, from PIN's website. I note the reference to "very low or no fees".
Co-investments
We invest in a portfolio company directly, alongside a private equity manager.
GN: top work on this. Added value to us on any measure! I own the second of your top 2. You obviously have personal needs for capital growth. Have you given any thought to those of us 'silvers' who might favour divi? I think you seem to gut feel CTPE but I am not sure why?
"Where we are looking at HMRC-authorised investment trusts, they enjoy tax privileges, i.e. exemption from taxes on chargeable gains (please do your own due diligence on this topic!)."
Unless I am terribly mistaken, Graham is referring to the ability of Listed PE Investment Trusts WITHIN THE FUND to reinvest the proceeds of portfolio sales free of CGT.
You still pay CGT on any share price gains when you sell your the shares in the Investment Trust.
If I'm wrong, please correct me and make me very happy indeed - I own quite a few of these - namely
HgCapital Trust (LON:HGT) , Oakley Capital Investments (LON:OCI) , ICG Enterprise Trust (LON:ICGT) , Harbourvest Global Private Equity (LON:HVPE) and Pantheon International (LON:PIN)
That is my understanding and what I meant re: taxation, Monty Carlo!
We can divide PE into the following broad categories:
Different size PE firms will concentrate on different size companies. OCI, for example, is into growth capital for smaller companies. They don't seek to take the companies public. When the company is big enough they will sell their stake to a PE firm that takes on bigger companies. The feedback seems to be that OCI has provided good value for the companies they have helped. So there's some word-of-mouth.
I own Oakley Capital Investments (LON:OCI) , so please don't take this as bashing them, but their investment in Time Out (LON:TMO) has made me pause for thought more than once.
Not everything they touch turns to gold.