by Cherry Reynard from interactive investor, 14th October 2025:
On the face of it, private equity looks like the bargain of the decade. The Association of Investment Companies (AIC) private equity sector has the strongest performance record of any investment trust sector.
Over a decade, the average private equity trust is up 670% (to 13 October) – that’s more than double the return of the Nasdaq. Yet trusts are trading at rock-bottom prices, with discounts of -25% to -30% not uncommon. What’s the catch?
There’s certainly a lot to like about private equity as an asset class..
James Carthew, head of investment company research at QuotedData, points out that there are many more unlisted companies than listed ones and many of these unlisted businesses are among the best in their field. He says: “Often, businesses do not want the hassle that comes with being listed, and many private companies are opting to stay private for longer.” ..
Carthew says that there’s still plenty of choice in the sector. He points out that more risk-averse investors might want to look at Literacy Capital, for example, which invests directly into about 20 companies including an operator of trampoline and adventure parks, a tyre replacement and repair service for plant hire companies, and a manufacturer of polythene packaging products.
HgCapital Trust and Oakley Capital Investments are specialist trusts, holding a spread of new investments and maturing investments in the portfolio.
Carthew says: “HgCapital is big on software-related businesses. Oakley covers technology, business services, education, and consumer companies. As with funds focused on listed equities, the aim with private equity is to identify promising businesses and grow these over time. Most money is made by growing sales and earnings, not – as is often claimed – through financial engineering or savage cost-cutting.”
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