Fund Profile

ICG Enterprise 05 September 2019


Disclosure – Non-Independent Marketing Communication

This is a non-independent marketing communication commissioned by ICG Enterprise. The report has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on the dealing ahead of the dissemination of investment research.

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On a quiet August afternoon, we found ourselves reviewing the constituents of ICG Enterprise Trust’s top 30 underlying holdings. It triggered a thought: what does the UK’s FTSE All-Share Index look like beneath the surface? Understanding ‘what lies beneath’ is critical to investors because, for example, owning a passive investment product means being exposed to specific risks that active investors might not be.

Private equity should offer investors portfolio diversification opportunities. Interestingly, the net asset value of private equity has grown >7x since 2002 whilst, over a similar time period, the number of public companies in the US and Europe has declined. Private markets have outperformed public equities across multiple cycles and, as a result, allocations are increasing. For retail investors, private equity investment trusts offer the only exposure to this growing asset class.

ICG Enterprise Trust (Ticker: ICGT) invests in profitable, cash generative unquoted companies primarily in Europe and the US. Its 30 largest investments represent 46% of the portfolio at present. By comparison, 46% of the total market capitalisation of the FTSE All-Share is accounted for by just 14 companies; a much more concentrated profile. The sector spread of these companies is also relatively narrow.

In this research note, we compare and contrast the characteristics presented by the FTSE All-Share and the ICGT portfolio of companies across: portfolio composition, investment style, earnings growth and valuations. Our analysis shows that ICGT is less exposed to cyclical industries, such as oil & gas and financials, whilst maintaining higher weightings towards sectors with greater defensive characteristics, such as healthcare and education.

Later in this note, we compare the underlying growth characteristics of the top 46% of each portfolio over the last five years and find that earnings growth has been more consistent at ICGT. This consistency leads to a greater compounding effect: 11.8% compound earnings growth for ICGT vs. 9.5% for the top 46% of the FTSE All-Share. The difference is even more apparent when comparing ICGT to the whole of the FTSE All-Share.

Kepler View

We believe our analysis shows that the FTSE All-Share is actually highly concentrated and under-represented in what one might argue are the more defensive areas of the economy.

At present, listed private equity investment trusts trade on relatively wide discounts when compared to the rest of the investment trust universe. Since Q4’18 ICGT’s discount has narrowed, helped by strong results and more positive market sentiment. At the current discount level of 21%, ICG Enterprise is trading at a wider discount than its peer group average of 16%.

An investment in ICGT should provide meaningful diversification benefits, not least because the underlying portfolio investments are so different. The types of company, the way they are managed and the niches they occupy mean that they are capable of very different growth trajectories, as evidenced by our analysis later in the portfolio section. A discount of 21% looks good value in this context. ICGT is due to publish its H1’20 results on 3 October 2019.

Outperformance vs. public markets delivered over long term, through different cycles
Private equity valuations lag markets, so, discounts may be hard to assess accurately at any point in time
Underlying portfolio looks far more defensive and better diversified than the FTSE All-Share
Gearing in underlying companies will magnify valuation movements
Wide discount in absolute, and relative, terms
Sentiment towards risk assets and in particular LPE may remain subdued, meaning the discount may not narrow in the short term

Continue to Portfolio

Fund History

19 Oct 2023 Fund Analysis
ICGT has posted good interim results, illustrating the resilience of its buyout portfolio…
18 May 2023 Treasure hunters
What can a corporate raider’s perspective tell us about private equity trusts..?
13 Apr 2023 Far from the madding crowd
Smaller nimble companies, both public and private, may be best placed to navigate the current environment…
21 Feb 2023 Fund Analysis
ICGT’s continued portfolio resilience means it looks potentially attractive…
30 Nov 2022 Cry havoc!
Lessons from a year in which an already troubled world was savaged by the dogs of war...
16 Nov 2022 Fund Analysis
ICGT continues to differentiate itself from the peer group…
03 Aug 2022 Diverging fortunes in listed private equity
Growth capital and buyout trusts now trade at similar wide discounts. In our view, this belies very different prospects for underlying earnings and for valuations...
25 Mar 2022 Slides and Audio: ICG Enterprise
Download the presentation and listen to the audio from our 'Ideas for your ISA' virtual Spring event on 17 March...
23 Mar 2022 Fifteen ideas for your ISA
Slides and audio from our event last week, featuring fund managers running money in every major market in the world...
17 Mar 2022 It's the end of the world as we know it
We examine five potential themes for investors seeking long-term returns in a troubled and uncertain world...
01 Mar 2022 Fund Analysis
ICGT continues to progress towards its target of 60% ‘high-conviction’ investments…
02 Feb 2022 Getting in on the act: Private markets
Private markets could be the next big opportunity for investors…
06 Oct 2021 Slides and Audio: ICG Enterprise
Download the presentation and listen to the audio from our 'Now that's what I call a discount!' Autumn conference on 30 September...
23 Sep 2021 Even better than the real thing
We explain private equity and examine why tweaks to listed private equity trusts give the sector an advantage over the direct route...
04 Aug 2021 60/40 and other dinosaurs
A simple practical step to take your portfolio from the 1990s into the 2020s...
08 Jul 2021 Fund Analysis
ICGT continues to deliver consistently strong returns…
19 May 2021 The complexity premium
We examine the idea that extra returns can be obtained from buying investments which are perceived to be more complex by most investors...
10 Mar 2021 Spring Conference '21
Audio and presentations from 21 of the UK’s leading investment trust managers…
04 Mar 2021 Slides and Audio: ICG Enterprise
Download the presentation and listen to the audio from our 'Ideas for your ISA' Spring Conference on 04 March...
03 Mar 2021 Fund Analysis
With momentum behind ICGT, we anticipate further NAV progress into the financial year end...
05 Nov 2020 The haves and have nots
With listed private equity trust discounts widening, are investors mistakenly assuming that underlying portfolios will perform worse than public market indices?...
17 Jul 2020 Active ownership of private equity in a crisis
An active approach is an effective means to minimise risks and maximise returns.
25 Jun 2020 Selling the family silver
Is there something fishy about a trust paying dividends from capital?
04 Jun 2020 Fund Analysis
With its focus on defensive growth, ICGT’s current discount feels unwarranted...
03 Jun 2020 Price is what you pay, value is what you get
The listed private equity sector has seen discounts widen markedly, but does this present an opportunity?
13 Nov 2019 Results analysis: ICG Enterprise
In its interim results, ICG Enterprise celebrates its promotion to a new index and continued success...
13 Nov 2019 The parallel worlds of listed private equity
Some private equity trusts are on an average premium of 18%, whilst others trade on discounts of 15%. Are we missing something!?
05 Sep 2019 Fund Analysis
ICG Enterprise Trust gives investors access to outperforming private equities...
24 Jul 2019 Fool's gold?
We examine the relationship between how much a fund costs and how it performs, with surprising results...
18 Jun 2019 Going private: Why should investors consider adding private equity to portfolios?
ICG Enterprise Trust busts some key myths surrounding 'risky' private equity...
13 Jun 2019 Real growth in a world of fake news
Presentations and audio from our event at the London Stock Exchange, where six fund managers set out their stall for an exciting future...
15 Apr 2019 Results analysis: ICG Enterprise
Brief review of ICG Enterprise's 31st January Final results, announced 15 April 2019...
10 Apr 2019 Because they're worth it
With the rise of the passives putting more pressure on fees than ever before, we argue that performance fees could be the key to encouraging truly active investment trust managers...
03 Apr 2019 Nice guys finish first
We review the rise of ESG, its impact on investment trusts, and the various ways ESG has evolved in the trust world...
03 Apr 2019 ESG: Impact
27 Feb 2019 A marathon not a sprint
Our research shows that investment trusts' structural advantages give them a significant edge for investors seeking long term capital growth...
16 Jan 2019 Fund Analysis
Differentiated access to an asset class that continues to outperform...
17 Oct 2018 Missing something?
As more and more of the world's most exciting companies delay listing, the opportunity in private companies has become too large to ignore...
16 Oct 2018 Results analysis: ICG Enterprise
Brief review of ICG Enterprise's 31st July interim results, announced 4 October 2018...
22 Aug 2018 Reassuringly expensive?
Some investment trust premiums have been stretched to eye-watering levels. Have investors been enjoying themselves in the sun too much? We try to rationalise current levels and suggest alternatives...
21 Feb 2018 Fund Analysis
ICG Enterprise aims to deliver better than equity market growth over the cycle, through investing in private unlisted companies.
21 Feb 2018 Once bitten, twice shy...
Fearful memories of 2008 mean discounts remain wide in the listed private equity sector, despite excellent returns from some of the trusts it contains...
28 Jun 2017 Fund Analysis
28 Jun 2017 Searching for value
We identify pockets of value in the booming listed private equity sector...
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