HgCapital Trust (HGT) says its underlying investment return for the second quarter was 0.5%. However, the share price discount widened a little and, taking the first quarter’s falls into account, that left investors with a 4.9% drop in net asset value (NAV) in the first half of the year and a 24.9% slide in the share price. The NAV return reflects a fall in average valuations from 25.2 times of operating profits, or earnings, at 31 December 2025 to 22.9 times at 30 June.

Within the private equity portfolio, revenue and earnings growth remains robust, with 11% year-on-year organic revenue growth and 17% earnings (EBITDA) growth. In addition, the £134m of exits achieved over the first half included 31% average uplifts to valuation for Intelerad and Geomatikk, which were exited in full.

Given concerns about the private credit market, it might be encouraging that the ratio of net debt to EBITDA fell from 7.4 times to 6.9 times in the first six months of the year. However, that reflects both growth in EBITDA and a smaller increase in net debt.

To help address the widening discount, HGT bought back £19m of its shares in the first half.

The NAV and share price falls were driven by fears over the impact of advances in agentic AI on HGT’s investments. The chairman had this to say: “We remain confident in the long-term investment case for the mission-critical B2B technology and services businesses that make up the HgT portfolio. The businesses in the portfolio are typically deeply embedded in their customers’ workflows, hold proprietary domain data built up over many years, and operate in regulated or high-trust environments where switching costs are high. These are characteristics that we believe make them resilient to, and indeed well-placed to benefit from, the application of AI.”

QuotedData’s James Carthew said: “HGT has built up a loyal fan base on the back of its impressive track record. A number of buyers stepped in to snap up stock as the discount widened, and the manager has committed to increasing its stake as well. HgCapital has done a lot of work to educate us of the extent to which its businesses are exploiting AI for their own benefit. However, I still think that nervous investors will need to see more evidence – perhaps into 2027 – of the resilience of HGT’s portfolio before its rating recovers. In the meantime, there might be scope for HGT to step up the pace of buybacks. £19m is a big number but only just over 1% of the market cap.”