Disclosure – Non-substantive Research
This is not substantive investment research or a research recommendation, as it does not constitute substantive research or analysis. With this commentary, Kepler Partners LLP does not intend to influence your investment firm's behaviour.
The past year has seen a significant shift in risk appetites. Examples abound, but within investment trusts this has been reflected by a general widening of discounts. One of the biggest swings has been listed private equity where discounts for both growth capital trusts and more established private equity trusts have widened significantly. In our view, these big moves in sentiment have been driven by concerns on two distinct, but related aspects: underlying company earnings and valuations. Earnings worries are a result of potential declining growth rates, either a result of inflation or from a looming recession. Valuations in public markets have declined, which arguably impacts multiples used to value private companies. We examine each influence in turn, to evaluate whether the sector’s significant de-rating looks justified.
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