Patria Private Equity (PPET) achieved its best underlying performance in three years in the 12 months to 30 September, annual results show.
The £941m investment trust generated a total net asset value return of 10.6% from its holdings in private equity funds and stakes in unquoted companies. That was ahead of the modest 5.4% and 2.4% performances in the previous two financial years when a strong pound crimped the returns from its mostly European investments. Before that, in 2021 and 2022 it yielded more impressive 37.9% and 14.1% returns.
Delivering his last annual report, outgoing chair Alan Devine said the private equity market had not recovered last year in the way he had anticipated. Nevertheless, the portfolio grew 8% on a constant currency basis, which he said was pleasing given the “challenging” macroeconomic backdrop, increased trade tensions, geopolitical instability and weak consumer confidence.
The second half of the year was particularly strong, the chair said, with a 7.9% underlying return “hopefully a sign of positive momentum” as corporate deal-making spreads below the meg-caps, giving private equity funds more opportunities to sell stakes in smaller and medium-sized companies.
Fund manager Alan Gauld said the exits from investments were not at previous levels but were good: “Realised gains during the year were derived from full or partial sales of underlying portfolio companies, which were at an average valuation uplift of 11.9% compared to the unrealised value two quarters prior (2024: 19.3%). The headline realised return from the portfolio exits equated to 2.3 times cost (2024: 2.1 times cost), which we consider a strong performance in what remained a challenging backdrop for private equity managers to conduct successful exit processes.”
Devine said the performance was underpinned by continued strong earnings growth with profits of PPET’s top 100 companies rising by 13.1% on average, down from 18.1% in the 2024 financial year.
“Whilst the NAV total return underperformed the FTSE All-Share index returns of 16.2%, as public markets continued to perform strongly, it has outperformed … over five and ten years, and we expect the long-term trends to continue,” he said.
The actual return to shareholders came in at 7% as the shares fell further behind the portfolio with the discount to NAV widening three percentage points to 34.4%. The return was down from the 24.9% shareholders enjoyed in the previous 12 months when the discount narrowed sharply after the launch of a share buyback programme.
In the last financial year the company bought back 2.7% of its shares at a cost of £22.7m. The discount has since narrowed to 25%.
Despite the discount, PPET has provided a strong long-term performance with a total shareholder return over 10 years of 341% ranking it fourth out of 14 trusts in its sector.
A fourth dividend of 4.4p per share took the total to 17.6p, up from 16.8p last year, putting the shares on a 2.8% yield.
Our view
James Carthew, head of investment company research at QuotedData, said: “It’s great to see Patria Private Equity reporting a double digit NAV return for its last financial year. Currently, within its peer group it ranks second behind 3i Group (III) over one year and fourth behind 3i, Hg (HGT) and Literacy Capital (BOOK) over three years. The discount has narrowed over the last few years but the performance track record merits a better rating.”
