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In the press

Preparing for a wave of value write-downs in the private equity trust universe

Ian Conway, Shares Magazine, 30 June 2022:

Private equity investors have been put on warning after press reports last month that privately-owned BNPL (buy now, pay later) specialist Klarna was seeking to raise fresh capital at a steep discount to its previous valuation.

This has raised the question of whether private equity valuations need to be downgraded across the board, as this would affect many investment trusts with unquoted holdings…

SWINGS AND ROUNDABOUTS

UK investment trust Chrysalis Investments (CHRY) revealed in its March factsheet that Klarna was its second largest holding, making up 19% of the portfolio and group net asset value of roughly 212p per share based on what was thought to be a conservative valuation of $30 billion…

THE BIG NAMES

Most small investors who want exposure to the $5.3 trillion global private equity market tend to buy specialist investments trusts.

The top three private equity investment companies are 3i (III), which manages £13.5 billion of private assets, HarbourVest Global (HVPE) with £3 billion of assets and Pantheon International (PIN) with £2.4 billion of assets…

EXPERT VIEWS

Just as with individual stocks, calling the bottom in private equity vehicles is impossible but the team at Numis argue Chrysalis’s current share price appears to be ‘factoring in a significant amount of bad news’…

James Carthew, head of investment company research at QuotedData, says past data suggests private equity NAVs tend to beat their listed market counterparts during bear markets.

‘Discounts tend to overshoot on the downside as investors get overly pessimistic and some real bargains appear. Shares in HgCapital Trust (HGT) have risen more than five-fold since 2008, and despite trading on a 44% discount Pantheon international’s share price has risen more than tenfold,’ says Carthew.

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