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Discounts narrow on private equity trusts

Double discount to be had on trusts which sell holdings for a premium says Nic Humphries, CEO of HgCapital.

Discounts narrow on private equity trusts

Private equity trusts are gaining popularity with investors and discounts in the sector have narrowed. The sector has an average discount of 22%, which has fallen compared to a year ago when the sector average was 34%.

HgCapital trust  invests in European private equity and has one the lowest discount in the sector, at 11.5%. The trust focuses on telecoms, healthcare, industrials, business services and renewable energy and made two realisations in the second half of this year.

However Nic Humphries, CEO of HgCapital, believes the discount on the trust is still too wide as many of its investments have been realised at a premium to their net asset value (NAV).

Earlier this year the trust sold Mercury Pharma, which it bought from the public market in 2009. After restructuring the business it was sold for over 4 times its original price to Cinven, another private equity group.

HgCapital trust has given share price total returns of 45% over the past five years, whilst the FTSE All Share has total returns has given 11%. The trust is currently trading at £10.08, compared to its NAV of £11.39.

Humphries added the trust is cautious of making new investments in the current environment of lacklustre growth and is being more selective in its approach.

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