JP Morgan unveils private equity trust 'clean out'

JP Morgan has announced a 'clean out' of its £262 million private equity trust.

The closed-end fund of private equity funds is looking to repurchase up to $20 million of equity shares and re-position its portfolio by exploring the potential for secondary sales of pre-crisis assets, recycling the proceeds into growth opportunities.

This should create a more 'transparent and concentrated' portfolio, its board believes, while analysts note the secondary market has also provided a useful exit route for rivals Princess Private Equity and SVG Capital.

The move follows an announcement by the trust in August to issue a raft of zero dividend preference shares, which offer no income but a fixed return at a pre-defined date.

However, since the deal the NAV of JP Morgan Private Equity ordinary shares has fallen by 21%, while the average private equity fund was up around 1% at the end of October.

Analysts at Investec pointed out that with its wide discount of more than 45% it was 'positive' to see the trust's manager and board take action.

'A clean out of the portfolio should also be beneficial in order to recycle cash into opportunities with greater upside,' Investec's investment company research team said.

But they added that sales of pre-crisis assets would likely be at a discount to current carrying values, though share buybacks could offset this.

'The key will be just how discounted the sales would come at and do the newer opportunities provide a greater upside from the sale prices achieved for legacy assets,' the team explained.

'The quantum of the share buyback will have the most impact on share price movement in the short-term as liquidity is provided.  With shares being bought back at up to a 35% discount to 30 September NAV, the buyback will be NAV accretive and could offset any reduction in NAV from the sales of non-core pre-credit crunch assets.'