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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
CTPE’s portfolio represents a tangibly different opportunity…
Overview

CT Private Equity (CTPE) is differentiated from peers in the listed private equity (LPE) sector partnering with smaller private equity groups, targeting the lower mid-market. These managers typically have smaller funds than the larger PE groups and target commensurately smaller companies with revenues typically in the £40m-£60m range.

As a result of this focus, the CTPE portfolio has a very different feel. It has a wider exposure to relatively smaller companies, which shows through the valuations of companies within CTPE’s co-investment portfolio, which are more reasonably valued than other trusts in the sector. As such, investors have a very different exposure to private equity than the ‘mega-deals’ that typically make the headlines in newspapers.

As we discuss in the Gearing section, CTPE’s managers aim to maintain a geared exposure over time. Investing partly in co-investments means that the team have a good level of control over CTPE’s balance sheet. Gearing has ticked up of late and commitment cover has reduced, although neither is out of line with long-term averages.

CTPE is amongst the top performers in the peer group over five years. Following a very strong run of relative and absolute performance in the three years between 2020 and 2022 inclusive, CTPE’s performance has been rather more muted since then, reflective of the private equity market in general. CTPE’s managers believe that this is a period of re-adjustment for the sector and that as the industry factors in higher interest rates, deal volumes will start to increase. This is important for NAV progression but also potentially the share price rating (see Discount), and a return to higher deal activity could be the catalyst that sees the discount potentially narrowing.

Analyst's View

We believe that CTPE’s differentiated strategy has a number of benefits, and is complementary to other LPE holdings investors may have. To us, it makes sense that the PE groups that CTPE invests through are hungrier, with the need to deliver strong performance to earn performance fees. Secondly, the smaller size of companies means less aggressive valuations and lower gearing are in evidence (see Portfolio section). In a private equity market with record levels of dry powder, CTPE may be on the right side of the trade when these larger private equity houses are looking to invest.

The diversified approach means that specific risks are minimised. Co-investments have been an important driver of NAV returns, and in our view, higher allocations are to be welcomed, with the twin potential to boost returns and lower costs (see Charges section). As we discuss in the Gearing section, with more investments being made than realisations, gearing has crept up. The recent move by the board to extend the facility gives more room for manoeuvre, but further news on disposals—in particular the five top holdings highlighted by the manager—will further reassure investors. CTPE’s shares have, historically, attracted a premium rating to peers, and if market sentiment returns, one cannot rule out this situation returning. The differentiated strategy, the high formulaic dividend which yields 6.1% (see Dividend section), and the strong historic performance represent an attractive package for long-term investors looking to harness the strengths of the private equity industry for their portfolios.

Bull

  • Long, strong 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 may prove persistent
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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