James Carthew for Investment Week, 24 January 2023:
Within the investment companies sector, it has to be admitted that 2022 was a pretty poor year for funds investing in global equities.
Only one, Brunner, managed to beat the MSCI AC World index, in NAV terms, although Lindsell Train, Alliance Trust and F&C all came close.
However, while it is not really sensible to judge funds over such a short time period, over ten years the picture is not much better.
Just four of 13 surviving global equity trusts beat the MSCI AC World index over that period.
If we look at the private equity sector instead, the picture is much better.
Nine of 13 surviving global private equity trusts beat the index in NAV terms over the ten years, and the best of these – HarbourVest Global Private Equity – even outperformed Scottish Mortgage, the best-performing global equity fund.
When you talk to private equity managers, they are not surprised by this picture.
They point to factors such as shrinking public equity markets, companies opting to stay private for longer – maybe never turning to public markets – and a much greater opportunity set for private equity managers.
They talk about their ability to take a longer-term view than the average public equity investor, the ease of securing finance, the ability to build businesses without worrying about any short-term impact on margins, and the greater flexibility that they have to right-size companies, spin off divisions, and strengthen management teams.
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