Updated 08 May 2024
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This is not substantive investment research or a research recommendation, as it does not constitute substantive research or analysis. This material should be considered as general market commentary.

Buyout giant CVC Capital Partners’ IPO a couple of weeks ago has been a blockbuster success. Why, at the same time, does the FT appear to ‘have it in’ for the private equity industry? Coverage of private equity-related newsflow is generally sceptical of the industry’s value-add, scornful of those who invest in private equity, and predict its (imminent?) demise.

At the same time, discounts across the listed private equity (LPE) sector continue to remain at extremely wide levels – both in absolute terms, but also relative to history and the wider investment trust sector. The market too, it would seem, is taking a dim view. Sounds like this patient needs an urgent health check.

We examine the macro signs for potential trouble brewing in the LPE sector, and then make a more thorough examination of the underlying vital signs. A stopped clock tells the right time twice a day, and so the FT might be right at some point in the (distant?) future. However, whilst we cannot say all private equity funds will outperform listed markets forever, we do not necessarily detect signs that the private equity sector is moribund. On the surface, there may be some outward symptoms that give light concern and may warrant attention, but we think a referral to urgent care is not warranted.

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