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HgCapital suffers from cash drag and writedowns

by Robert St George on Mar 10, 2014 at 09:36

HgCapital suffers from cash drag and writedowns

The £441 million HgCapital Trust has announced disappointing results for 2013, thanks in part to its heavy cash weighting.

HgCapital lost 1.6% on a net asset value basis last year, posting a 1.4% share price total return, while the FTSE All Share index rose by 20.8%.

The private-equity fund suffered from the amount of uninvested cash on its balance sheet, currently accounting for 19% of the portfolio, as well as several company-specific writedowns.

These included taking £8.3 million off the value of Lumesse, a HR software group, and £3.8 million off internet domain manager NetNames. Both were blamed on weak trading at the firms.

‘Though disappointing, the year’s return needs to be viewed in the context of the long-term returns achievable in private equity over the investment/realisation cycle,’ commented chairman Roger Mountford.

More positively, he pointed to a recent acceleration in investment activity, with £24 million allocated across three new deals so far this year. Sales have picked up too, including the floatation of Manx Telecom for a return of 2.1 times the initial outlay.

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