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Retail investors turn to private equity investment trusts

Investment Trust Insider : F&C discount flags value in property trusts

Retail investors have significantly upped their exposure to private equity investment trusts over the past 12 months in search of bargains, causing discounts to narrow considerably during 2019.

HarbourVest Global Private Equity (HVPE) said retail exposure within its pool of clients has almost doubled over the past year, climbing to 5.3% of its share register on 30 June 2019 compared to 2.8% on the same date last year.

Pantheon International Participations (PIN) said it had also seen its retail shareholder base steadily grow over recent years to now stand at around 10% of its share register.

Data from platforms show this has been a broad-based trend…

At the same time, the AIC Private Equity sector’s discount widened in 2018, starting the year at 15% and ending the year at 26%.

James Carthew, head of investment company research at Marten & Co, said this was the result of investors worrying over how private equity will perform during the next recession, the asset class having “fallen off a cliff” during the previous crash…

“In anticipation that something might be going wrong with the economy [last year], people have been junking them,” Carthew said.

He added this was “probably a mistake” and opened up an opportunity for bargain hunters to swoop. The sector’s average discount has narrowed since the start of 2019 to 15%.

The AIC’s communications director, Annabel Brodie-Smith, said private equity investment companies tend to react strongly to the markets’ appetite for risk…

Carthew also noted that while share prices plummeted, the net asset value (NAV) held up better. The sector’s NAV total loss between October 2008 and March 2009 was 12.95%.

In comparison, the MSCI AC World index declined by 12.38% in that period, according to FE data.

He also said private equity trusts’ portfolios are more conservatively valued this time around, so there is every chance investors are picking up a double discount.

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