Investment trust insider on Chrysalis – James Carthew: How Chrysalis could re-rate after a bad year
Chrysalis (CHRY) has been in the news as the board has agreed the new terms of the fund manager’s performance fee which shareholders will need to approve. It still faces the criticism that, unlike most fees in the private equity arena, this is charged on unrealised gains. However, keeping the high watermark in the formula at least ensures that net asset value (NAV) has to surpass 253p per share before another fee starts to accrue.
The Jupiter growth capital fund held a capital markets day last week at which we heard from a number of the portfolio’s companies with presentations from Deep Instinct, Featurespace, Wefox, Smart Pension and Brandtech. The investment case for each of these sounds compelling, and you could make a case for them going on to be worth a multiple of their current valuation within Chrysalis’s NAV.
However, for me, one of the most interesting parts of the day was a section on valuation from the chairman of the audit committee and two of the members of the new independent valuation committee.
If that sounds a bit sad and you’re thinking about whether to read on, consider that Chrysalis also recently published an NAV of 148p as at 30 September 2022. Every holding was revalued as at that date, so the valuation is as current as it can reasonably be, yet the shares are trading at nearly half that at 75.4p. Why are investors applying such a large discount to the board’s valuation?
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