Fund Profile

Disclaimer

Disclosure – Non-Independent Marketing Communication

This is a non-independent marketing communication commissioned by CT Private Equity. 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.

Overview
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Overview

CT Private Equity Trust (LON:CTPE), in its results for the 2022 financial year, continues to demonstrate the advantages of its differentiated investment strategy. Despite a number of name changes over the years, the last being from BMO Private Equity Trust, the same team has consistently employed the same philosophy of targetting smaller private equity groups, who are hungrier and at an earlier stage of their development. They also prefer to target deals in the lower mid-market, which the team believe enables deployment of capital in a less competitive environment.

At the same time, the managers believe in mitigating risks through diversification and, as a result, have exposure to c. 500 underlying companies, through investments led by more than 50 private equity managers. As we highlight in the Portfolio section, shareholders have recently voted to raise the maximum invested in co-investment deals from 50% to 65%, with the aim that over the medium to long term, the portfolio will have roughly equal proportions of primary funds and co-investments.

Gearing has added to returns, historically, but mindful of the economic backdrop, the team are cautiously positioned and gearing is at low levels (see Gearing section). On the one hand, this offers the potential to take opportunities as they come up, but at the same time also means there is no pressure to make investments.

CTPE pays a formulaic dividend, which the managers aim to grow steadily, whilst providing downside protection. As we discuss in the Dividend section, by taking the most recently announced 6.95p dividend, we can project a prospective dividend yield of 5.7%, at the current share price.

Analyst's View

CT Private Equity Trust (CTPE) stands out to us for a number of reasons, not least the leading NAV performance compared to peers over the last five years (see Performance section) and the fact that it tends to trade at a narrower discount than peers (see Discount section). Fundamentally, however, it is the portfolio and the manager’s approach to investing that, in our view, makes CTPE stand out from the AIC Private Equity peer group. The team invest in younger, hungrier private equity teams, targetting the less competitive areas of the market. They balance the extra risk this entails by ensuring diversification.

In our view, if historical returns are anything to go by, increasing the proportion of the portfolio invested in co-investments should not only improve risk-adjusted returns, but also, at the margin, reduce the OCF/KID cost. As we note in the Charges section, this is because co-investments can come with significant fee advantages. As such, we see this as a positive development, which should make CTPE more attractive to investors over the medium term, both in terms of higher potential returns and lower costs.

Activity in private equity has seen something of a slowdown, so with exit conditions being more muted, it seems fair to lower return expectations for the coming year. That said, underlying portfolio companies, as represented by CTPE’s co-investments, reported revenue and EBITDA growth last year of 30% and 22%, respectively. If this continues, this should underpin further portfolio value growth. According to Morningstar data, CTPE now trades at a discount of c. 30% to the most recently published NAV, narrower than the peer group, but wider than the five-year average of c. 18%.

Bull

  • Strong and long track record of beating listed equity returns
  • Diversified exposure, complemented by significant proportion of co-investments
  • Differentiated strategy that has delivered strongly in the past

Bear

  • Private equity is a relatively high-cost investment area, as seen in the OCF/KID figures
  • Historically, higher gearing than most peers, which can exacerbate downside risks
  • Discount is narrower than peers and board not particularly active in buying back shares
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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