Oakley Capital Investments (OCI), an £841m private equity fund focused on technology, education, consumer and business services in Europe, believes it will be a “net beneficiary” of artificial intelligence.
Seeking to distance itself from rival HgCapital (HGT), which is solely invested in business software providers and has seen its shares fall heavily on fears of AI disruption, OCI said just 16% of its portfolio was invested in software companies.
Most of these provided “mission-critical” solutions and systems of record to customers which valued their proprietary data and would find it difficult and expensive to replace them, it said.
Around two thirds of the portfolio was in businesses that relied on the physical delivery of “tangible products” such as technology infrastructure, field-based services, luxury brands, sports and education.
“While AI is unlikely to dis-intermediate these products and services it has the potential to enhance revenue growth, improve margins and drive productivity gains,” OCI said.
Similarly, for its digital companies OCI believed there was a big opportunity for them to improve their efficiency and effectiveness through AI, rather than being displaced.
Oakley Capital, the private equity group founded by Peter Dubens whose funds it invests in, had been on the front foot with AI, OCI said. The launch of the Oakley Touring Fund in 2024 had enabled investments in AI startups serving business sectors. It had also led to the formation of the Oakley AI lab which shared information between portfolio companies on how to best make the most of the new technology.
AI fears and the Iran war have heightened market volatility in the past six weeks, but Dubens said these were the sort of periods historically where the best private equity investments had been made. “We believe the current market environment presents a compelling opportunity to partner with more exceptional entrepreneurs at attractive entry points.
“At the same time, we are working closely with our founders to harness emerging AI technologies, enabling them to move further and faster, and to build future-ready businesses,” he said.
“Robust” year despite tariffs
The statement on AI came in the 2025 annual report that confirmed OCI made a modest 6% total underlying return last year from its portfolio of 38 companies, mostly held through Oakley Capital funds. Positive currency movements accounted for half of the 45p rise in net asset value per share to 738p.
However, shareholders did much better with a 15% total return after the shares participated in the market rally after US president Trump softened the impact of his tariffs. A £50m share buyback programme, raised after the company stopped paying a “nominal” dividend, also helped by narrowing the gap – or discount – between the share price and NAV to 23% from 28%. The board, whose new chair from tomorrow is Scottish Mortgage Trust (SMT) board leader Chris Samuel, plans to buy back a further £20m of shares this year.
Trading at its companies was “robust”, OCI said, with average earnings growth of 11%, down from 15% in 2024, with the valuation multiple on those earnings steady at 16.3 times.
Despite a subdued mergers and acquisitions market, OCI made £92m from disposals and refinancing. This included £57m from exits of companies where it made an average of more than 3.6 times return on its investments before fees. The biggest of these was from Oakley Capital Origin 1 fund selling its stake in cloud-based legal information subscription platform vLex to rival Clio, in which the fund partly reinvested.
North Sails, the sails maker that is one of two direct investments that OCI is looking to sell eventually, also made a “meaningful contribution” to NAV growth and at 31 December was valued at £170m or 14% of net assets. This was driven by strong financial performance and the mergers with Doyle Sails and Quantum Sails in 2024.
However, a slump in the share price of Time Out Group (TMO), the only listed company in the portfolio, generated an unrealised loss of £54m. Its value fell to £23m or 2% of net assets after a challenging period for its media division led to a strategic review and operational changes aimed at returning it to profitability.
Feeding the pot for future growth, OCI made £197m new investments equal to 16% of the portfolio. These included £110m in 10 fast-growing mid-market companies through its Flagship and Origin funds such as: G3, a strategic advisory consultancy; Brevo, a European customer engagement software provider; and Paraty Tech, a Spanish hotel demand generation platform. Its venture Touring and PROfounders II funds made 12 new investments in promising start-ups. The remaining £87m was in follow-on investments in existing companies to help funding 70 bolt-on acquisitions mostly in business services and education.
After a move to the LSE’s main market, OCI joined the FTSE 250 index in September. Over five years OCI shareholders have made an 81% total return underpinned by 13% annualised compound growth in the portfolio.
Stay a step ahead. Our daily newsletter brings you the latest on investment trusts and active ETFs. Subscribe here.
