CT Private Equity discount remains stubborn despite NAV uplift

According to the trust’s Q3 results, the NAV total return was 9.3% and up by 14% for the nine-month period ended 30 September 2022. Meanwhile, the share price total return for the quarter fell by 9.7% and 17.2% for the same nine-month period.

According to the Association of Investment Companies, CTPE is currently trading at a 34.2% discount. This reflects a wider sector trend, as private equity investment trust investors have rushed for the exits again this year, with discounts trading at pandemic lows. 

As at 30 September, the trust’s net debt was £23.7m, equivalent to a gearing level of 4.4%. The current net debt is around £32m prior to the receipt of the proceeds from the sale of San Siro, one of its previous holdings, which added £34.9m in value for the company.

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“The cost of borrowing is increasing but moderate gearing should still enhance shareholder returns over the medium and longer term,” said investment manager Hamish Mair.

The outstanding undrawn commitments are £192.8m of which £25.7m is to funds where the investment period has expired, Mair said. During the quarter, two fund commitments, one secondary investment and three co-investments were made.

“The total of outstanding commitments remains within a manageable band. Realisations are likely to come in below the record-breaking total for 2021 but given the continuing strong run of exits the total will be very healthy,” the manager added.

There have been numerous valuation changes over the quarter, which Mair said were “mostly positive” but with a “sizeable minority” of downgrades reflecting a range of pressures on the trust’s underlying businesses internationally. 

In his outlook, Mair said that reports from the trust’s underlying funds and co-investments are increasingly “reflecting the pressures which many investee companies are facing”, including general inflation, energy price rises and supply chain issues.

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He said that demand in most areas, outside certain consumer facing sectors, remains robust and that confidence levels within the private equity sector and most of their underlying companies “remains good and this is manifested in strong deal pipelines”.

“The high degree of diversification across the portfolio, which spans the mid-market sector across Europe and further afield, also continues to be a distinct strength,” he said. 

“As we approach the end of 2022, we have confidence that the company will continue to build value for shareholders over the medium and longer term.”