Private Equity Closed End Funds.
The positive about Investment Trusts (Closed End Funds) listed on the Stock Exchange is that the Company capital is fixed. Unit Trusts (open ended Funds) are not and so if holders sell units the fund managers has to sell shares to repay investors. That can cause issues when a large numbers want to sell.
Investments Trusts will always have the same capital- but if investors keep selling the discount to the Net Asset Value(NAV) of the company will fall.
But as these investments
on the whole tend not to be listed the valuation of those assets can
cause concern as to the methodology of valuation.
Given some
of the large discounts the industry, I feel, need to do some-thing to
encourage shareholders to buy these funds. The new chairman of
Pantheon International (PIP) has said as much- see the end of this
blog.
I recall a
time when general Investment Trusts traded at 25-25% discounts- back
in the 1980's. Over the following decades some were taken over,
others changed investment strategy to become specialist and offer a
sector or geographic specialism.
I feel that
the same could happen in the PE sector. They do invest in good
companies, there are obviously some duds, but across the funds
covered here most performance have been reasonable.
A few are winding up and I would expect more boards to be looking at options- as PIP has done to see what can be done to narrow the discount and improve returns to shareholders.
The sector need to convince shareholders of the methods of valuation and look at performance fees. Kicking it at 8% seems generous to managers, not so to shareholders.
Potentially interesting times for this sector.
The below was compiled from research as I looked through the sector to get a better understanding of the opportunities. All views are my own and should be taken as that.
Any data errors please let me know.
Listed on the Stock Exchange according to the Association of Investment Companies the following listed funds invest in private equity.
3i (LON:III) 3i Group
abrdn Private Equity Opportunities Trust (LON:APEO) abrdn Private Equity Opportunities
Apax Global Alpha (LON:APAX) Apax Global Alpha
CT Private Equity Trust (LON:CTPE) CT Private Equity Trust
Dunedin Enterprise Investment Trust (LON:DNE)…
