Fund Profile

Disclaimer

Disclosure – Non-Independent Marketing Communication

This is a non-independent marketing communication commissioned by ICG Enterprise. 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

The market sell-off has not been kind to the listed private equity (LPE) sector. The share price of ICG Enterprise Trust (ICGT) has fallen more than most, and so we ask: do the fundamentals justify this treatment?

ICGT invests in profitable, cash-generative unquoted companies, primarily in Europe and the US. Increasingly it does so by the team deciding on individual investments themselves (rather than committing to third-party managers). The ‘high conviction’ portfolio now represents 41% of the total portfolio. Overall the trust retains a bias towards large- and mid-market buyouts, accounting for 88% of the total portfolio.

As we discuss in the Portfolio section, the overriding theme for quite some time – which is reflected in the sector exposure – has been for the managers to favour investments which exhibit ‘defensive growth’.

At an operational level, we believe that private-equity-backed companies are used to dealing with change, being well set up to evaluate new circumstances and adapt, enabling continued growth. Managers should be able to take a long-term view without the pressure of short-term performance which is found in public markets.

As such, we believe that there are good reasons to think that on a NAV basis over Q1 2020, ICGT may at the very least not perform any worse than the average of the peer group, and possibly better than wider equity indices.

In the Performance section, we evaluate the various listed and private-equity comparators available and conclude that ICGT’s NAV is likely to see a mark-to-market fall of between 12% and 18% for its 31/03/2020 valuation. This would indicate a discount range of 27% to 32% at the current price.

Analyst's View

An investment in ICGT provides meaningful diversification benefits over the long run, not least because the underlying investments are so different to those found in listed-equity indices. The dividend represents a 3.3% yield, and being funded from capital means it’s not subject to the same short-term headwinds other dividend sources currently face.

Due to defensive biases within the portfolio, we believe it’s fair to assume the operational performance of the portfolio will outperform that of those trusts which dominate listed-equity markets. Conversely, the share price has fallen by c. 30% since the start of 2020. As discussed in the Discount section, we estimate a potential discount range of between 27% and 32% to the 31/03/2020 valuation (expected to be announced in mid-June).

This represents a very wide discount for what we view as a high-quality trust. More recently, a board member has personally been buying shares, and the trust had previously bought shares back in a highly accretive fashion. This suggests board members are confident about ICGT’s future prospects. With cash and borrowing facilities making up 43% of likely commitments, this represents over two years’ worth of funding in the absence of any realisations. As discussed in the Gearing section, this is broadly in line with peers.

Aside from the valuation opportunity presented by the discount, we believe the portfolio is well positioned to benefit from a resumption of global economic activity. As such, now could be an interesting time to consider the trust.

bull bear
Strong NAV outperformance of listed-equity markets over the long term, with expectation that NAV outperformance will be maintained in the downturn Private-equity valuations lag markets, so precise level of discount is hard to determine
Underlying portfolio looks far more defensive and better diversified than the FTSE All-Share Gearing in underlying companies will magnify valuation movements
Wide discount in absolute terms Sentiment towards risk assets, and in particular LPE, may remain subdued, meaning the discount may not narrow in the short term
Continue to Portfolio

Fund History

19 Oct 2023 Fund Analysis
ICGT has posted good interim results, illustrating the resilience of its buyout portfolio…
18 May 2023 Treasure hunters
What can a corporate raider’s perspective tell us about private equity trusts..?
13 Apr 2023 Far from the madding crowd
Smaller nimble companies, both public and private, may be best placed to navigate the current environment…
21 Feb 2023 Fund Analysis
ICGT’s continued portfolio resilience means it looks potentially attractive…
10 Feb 2023 Wrong when it’s right
Economic data is balanced on a knife edge, but that hasn’t stopped the markets surging so far this year. With such a confusing picture to consider, we look at the opportunities lying elsewhere…
30 Nov 2022 Cry havoc!
Lessons from a year in which an already troubled world was savaged by the dogs of war...
16 Nov 2022 Fund Analysis
ICGT continues to differentiate itself from the peer group…
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...
25 Mar 2022 Slides and Audio: ICG Enterprise
Download the presentation and listen to the audio from our 'Ideas for your ISA' virtual Spring event on 17 March...
23 Mar 2022 Fifteen ideas for your ISA
Slides and audio from our event last week, featuring fund managers running money in every major market in the world...
17 Mar 2022 It's the end of the world as we know it
We examine five potential themes for investors seeking long-term returns in a troubled and uncertain world...
01 Mar 2022 Fund Analysis
ICGT continues to progress towards its target of 60% ‘high-conviction’ investments…
02 Feb 2022 Getting in on the act: Private markets
Private markets could be the next big opportunity for investors…
06 Oct 2021 Slides and Audio: ICG Enterprise
Download the presentation and listen to the audio from our 'Now that's what I call a discount!' Autumn conference on 30 September...
23 Sep 2021 Now that's what I call a discount 2021!
For the second year running we examine trusts on discounts which, in our view, don't make sense...
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...
04 Aug 2021 60/40 and other dinosaurs
A simple practical step to take your portfolio from the 1990s into the 2020s...
08 Jul 2021 Fund Analysis
ICGT continues to deliver consistently strong returns…
19 May 2021 The complexity premium
We examine the idea that extra returns can be obtained from buying investments which are perceived to be more complex by most investors...
10 Mar 2021 Spring Conference '21
Audio and presentations from 21 of the UK’s leading investment trust managers…
04 Mar 2021 Slides and Audio: ICG Enterprise
Download the presentation and listen to the audio from our 'Ideas for your ISA' Spring Conference on 04 March...
03 Mar 2021 Fund Analysis
With momentum behind ICGT, we anticipate further NAV progress into the financial year end...
05 Nov 2020 The haves and have nots
With listed private equity trust discounts widening, are investors mistakenly assuming that underlying portfolios will perform worse than public market indices?...
17 Jul 2020 Active ownership of private equity in a crisis
An active approach is an effective means to minimise risks and maximise returns.
25 Jun 2020 Selling the family silver
Is there something fishy about a trust paying dividends from capital?
04 Jun 2020 Fund Analysis
With its focus on defensive growth, ICGT’s current discount feels unwarranted...
03 Jun 2020 Price is what you pay, value is what you get
The listed private equity sector has seen discounts widen markedly, but does this present an opportunity?
14 Nov 2019 Results analysis: ICG Enterprise
In its interim results, ICG Enterprise celebrates its promotion to a new index and continued success...
13 Nov 2019 The parallel worlds of listed private equity
Some private equity trusts are on an average premium of 18%, whilst others trade on discounts of 15%. Are we missing something!?
05 Sep 2019 Fund Analysis
ICG Enterprise Trust gives investors access to outperforming private equities...
24 Jul 2019 Fool's gold?
We examine the relationship between how much a fund costs and how it performs, with surprising results...
18 Jun 2019 Going private: Why should investors consider adding private equity to portfolios?
ICG Enterprise Trust busts some key myths surrounding private equity investing...
15 Apr 2019 Results analysis: ICG Enterprise
Brief review of ICG Enterprise's 31st January Final results, announced 15 April 2019...
10 Apr 2019 Because they're worth it
With the rise of the passives putting more pressure on fees than ever before, we argue that performance fees could be the key to encouraging truly active investment trust managers...
03 Apr 2019 Nice guys finish first
We review the rise of ESG, its impact on investment trusts, and the various ways ESG has evolved in the trust world...
03 Apr 2019 ESG: Impact
27 Feb 2019 A marathon not a sprint
Our research shows that investment trusts' structural advantages give them a significant edge for investors seeking long-term capital growth...
16 Jan 2019 Fund Analysis
Differentiated access to an asset class that continues to outperform...
17 Oct 2018 Missing something?
As more and more of the world's most exciting companies delay listing, the opportunity in private companies has become too large to ignore...
22 Aug 2018 Reassuringly expensive?
Some investment trust premiums have been stretched to eye-watering levels. Have investors been enjoying themselves in the sun too much? We try to rationalise current levels and suggest alternatives...
15 Aug 2018 The income edge
Last year saw investment trusts soar in popularity among both retail investors and wealth managers. We examine why this has happened, as well as the structural advantages of investment trusts for income-hungry investors...
22 Feb 2018 Fund Analysis
ICG Enterprise aims to deliver better than equity market growth over the cycle, through investing in private unlisted companies.
22 Feb 2018 Once bitten, twice shy
Fearful memories of 2008 mean discounts remain wide in the listed private equity sector, despite excellent returns from some of the trusts it contains...
05 Jul 2017 Searching for value
We look at how investment trusts are seeking value in the booming listed private equity sector...
04 Jul 2017 Fund Analysis
A private equity trust that has witnessed a reversal in fortunes following recent management changes...
View all

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