Fund Profile


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BMO Private Equity (BPET) trust has had a very strong period of performance so far over 2021, which builds on what turned out to be a stellar 2020 NAV return. That said, the latest NAV includes a 30 June valuation for only 23% of the portfolio, with the rest valued prior to this. Given the strength of the market, this suggests that there is potentially ‘juice left in the tank’.

Due to buoyant valuations, it is no surprise to see BPET’s underlying managers capitalise: the value of realisations from the portfolio over the six months to 30 June 2021 almost doubled that for the entire year of 2020. Given the maturity of the portfolio, one can’t rule out further activity over the rest of the year.

BPET offers an attractive level of dividends paid from capital, based on a simple formula. The advantage of the formula approach is that for shareholders it is predictable, with the prospect of growth over time and with downside protection. As a result of NAV growth, BPET has paid a gradually increasing dividend, and the current quarterly dividend rate is 4.77p per share. Based on four dividends of this amount, the current yield on the share price is 4.2%.

Aside from its portfolio, BPET differs from peers in that it has employed leverage consistently over past years. In the manager’s view, the portfolio’s diversification suits a certain amount of structural gearing which has averaged 11% over the past decade. Currently, realisations and valuation gains mean that BPET is c. 6% geared, towards the bottom of the historic range. We understand that BPET’s managers aim to gradually increase this in line with average long term historic levels.

Analyst's View

Over the 12 months to 30 August 2021, BPET has been the best performer in the wider AIC listed private equity peer group, with a NAV total return (according to Morningstar) of 49%. This is impressive, but we believe that the evidence is there that that strong performance can potentially continue – at least over the short term.

BPET has exposure to smaller underlying companies than many peers (in private equity terms, BPET targets the ‘lower mid-market’). As such, the portfolio might be seen as a beneficiary of the record amounts of dry-powder (capital to be invested) amongst private equity managers targeting the mid-market. The realisations achieved so far this year perhaps give this idea credence, which has seen eight out of 12 exits to other private equity funds. BMO believes that BPET can be seen as in something of a ‘sweet-spot’ currently, selling investments into a competitive market, yet investing capital into an area of the market that is less competitive.

BPET offers investors a distinctive approach to accessing private equity. The approach might be seen to be higher risk – due to the types of companies and the gearing employed by the trust. Whilst this does not show up in NAV volatility statistics, share price volatility is higher than peers. We believe that the current discount of 18% does not reflect the strong momentum behind the portfolio. As such, despite being only slightly wider in terms of discount than peers, this could still be an opportunity.

Strong and long track record of beating listed equity returns
Private equity NAVs are provided relatively infrequently, meaning sentiment can significantly affect share price
Diversified exposure, complemented by significant proportion of co-investments
Higher gearing than most peers
Wide discount relative to level in January 2020, broadly in-line with peer group average
Private equity is a highly illiquid asset class, meaning discounts can potentially exist for longer
Continue to Portfolio

Fund History

08 May 2024 The doctor will see you now
Taking the pulse of the listed private equity sector…
08 May 2024 Fund Analysis
CTPE’s portfolio represents a tangibly different opportunity…
21 Dec 2023 The best-performing investment trust of 2023 (so far)
3i’s price rise this year is unlikely to be repeated, but what of the rest of the LPE sector?
14 Dec 2023 Fund Analysis
CTPE continues to deliver on its unique strategy…
31 May 2023 Fund Analysis
Increasing co-investment activity should add to CTPE’s appeal…
18 May 2023 Treasure hunters
What can a corporate raider’s perspective tell us about private equity trusts..?
19 Apr 2023 Are we nearly there yet?
We look at which trusts have done best year to date, and ask where there may be value…
13 Apr 2023 Far from the madding crowd
Smaller nimble companies, both public and private, may be best placed to navigate the current environment…
22 Mar 2023 Good vibrations
We identify some sectors with structural discounts we think could close over time…
28 Dec 2022 Fund Analysis
CTPE’s differentiated strategy continues to deliver strong results…
30 Nov 2022 Cry havoc!
Lessons from a year in which an already troubled world was savaged by the dogs of war...
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...
27 Apr 2022 Fund Analysis
BPET’s discount and differentiated portfolio make the trust stand out…
02 Feb 2022 Getting in on the act: Private markets
Private markets could be the next big opportunity for investors…
03 Nov 2021 Don't fear the reaper
With market direction hard to call, we consider the case for taking a long-term view in the investment trust sector…
13 Oct 2021 Fund Analysis
BPET currently seems to be in a private equity sweet spot, potentially making its discount attractive…
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...
21 Apr 2021 Fund Analysis
BPET’s strong 2020 and the recent sale of Dotmatics highlights the attractive returns private equity can generate…
25 Nov 2020 Fund Analysis
BPET has slipped to a meaningful discount, but offers a differentiated strategy that has outperformed equity markets…
View all

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