Steady year as discount narrows for CT Private Equity Trust

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CT Private Equity Trust (CTPE) formerly BMO Private Equity Trust announced its annual results for the year ended 31 December 2023. The company saw a NAV total return of 2.8% while shares were up 17.6%, although the discount remains considerable, at 38% at the time of publishing. During the year the company made new investments, either through funds or as co-investments, totalling £110.9 million. Realisations and associated income totalled £61.8 million. Outstanding undrawn commitments at the year-end were £209.3 million of which £26.4 million was to funds where the investment period had expired.

Regarding the performance, and the outlook for the company, chair Richard Grey commented:

“As expected 2023 has turned out to be a year of adjustment. Despite this the company’s portfolio has proved resilient and we delivered a positive total return in NAV and good growth in dividends The economic challenges which are presented by higher inflation and interest rates were anticipated in last year’s report and this has clearly affected the investment environment for private equity internationally.  As described in the Investment manager’s review your company’s portfolio has coped well with these challenges. This is based on strong underlying fundamentals for our investee companies which have recorded impressive growth in revenues and profits over the year, tempered by a slight softening in valuation multiples.

“The strong flow of exits which has characterised recent years has moderated significantly.  Given that our exits are on average achieved at a significant premium to recent carrying value, it is no surprise that our NAV has made relatively modest progress compared to years when realisations were much higher.

 “The slowdown in realisations flows from the macroeconomic situation. The increase in interest rates, which is accompanied by a noticeable tightening of the credit markets, results in one of the key elements of management buy-outs – i.e. debt – becoming more difficult to arrange with a consequent slow down in deal-making. Although the stock of private equity committed capital remains very healthy, it usually requires to be deployed alongside a similar or greater quantum of debt. This equity remains available and ‘in the system’ and will be deployed steadily over the coming years as debt availability improves.

 “Whilst investors’ long term enthusiasm for private equity remains intact, fresh commitments to private equity funds have decreased in most markets this year. This is in part due to the ‘denominator effect’ where substantial deployments in recent years now represent larger than expected components of overall portfolios which have not grown as quickly as projected. This is currently being corrected via a reduction or hiatus of new commitments to private equity until equilibrium is regained.

 “This moderation in activity resulting from higher priced and scarcer debt, reduced fresh equity commitments and more caution in general, is not without benefits for your company. The flow of investment opportunities that your managers appraise remains very strong reflecting the breadth of the mid-market universe we address and the depth of our networks in these markets internationally. As we look forward into 2024 the combination of our steadily maturing portfolio and our newly extended and enlarged borrowing capacity leaves your company in good stead to deliver further gains to shareholders whilst laying the foundations for future growth.”

CTPE : steady year as discount narrows for CT Private Equity Trust


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