James Carthew for Investment Week, 3 May 2023:
Over the past 12 months or so, the disconnect between the net asset values of a wide range of investment companies and their share prices has widened considerably.
The problem seems particularly acute in the area of alternative assets, which includes private equity, property, infrastructure and renewable energy infrastructure.
Discounts on private equity funds are extreme.
Large, liquid, well-diversified funds with good track records such as HarbourVest and Pantheon International are trading at around half their underlying value.
The best-performing of all investment companies over the past five years (up about 185%) is Oakley Capital Investments, yet even it is trading on a 29% discount to its net asset value.
It feels as though there is a mistrust of valuations within the sector, but there is little to justify that on.
Time and again, these funds crystallise significant uplifts to previous carrying values when they sell their assets, suggesting that – if anything – these carrying values are too conservative.
A recent example of this was chalked up by a more recent entrant to the sector. Literacy Capital, which listed in June 2021 and has already doubled in share price terms, just announced an 11% uplift on asset value over Q1 2023.
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