Investors seem to be wary of Listed Private Equity (LPE) despite continuing strong returns being delivered by funds within the sector. Indeed, corporate activity in the sector continues to highlight the significant value inherent in portfolios. Yet discounts remain significantly wider than the investment trust sector as a whole.
The biggest hurdle investors must surmount is, that at the current stage in the economic and stock market cycle, “this time, it IS different”. We believe that conservatively valued NAVs, balance sheets that are not stretched, with several multi-manager funds available to reduce specific manager risk, investors are being too recalcitrant in their appetite for LPE.
Institutional investors have been profiting from this. There are contradictory signals from retail investors too. Demand for Venture Capital Trusts (VCTs) has doubled this year from last year. According to data from the AIC, in the current tax year to 31 January 2018, VCTs have raised £483m, more than double the £221 million over the same period last year. At the same time, the venerable Scottish Mortgage Investment Trust has been decisively ramping up its exposure to private (unlisted) equities, whilst investors cheer from the sidelines. We believe that it is high time to look afresh at the sector.
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