Investors have dedicated a lot of attention to private equity trusts, for a variety of reasons. Like many alternative asset cohorts, the trusts appear to be cheap, with the majority of the names in the AIC's Private Equity sector still trading on double-digit share price discounts to net asset value (NAV). These discounts are above 30 per cent in the case of ICG Enterprise (ICGT), Pantheon International (PIN) and HarbourVest Global Private Equity (HVPE).
The catch? That some investors still question the validity of the valuations given on such portfolios, and that future returns could well be materially lower in an era of higher interest rates and more expensive borrowing. As such, shareholders might be forgiven for ignoring discounts and asking just how much progress has been made when it comes to realising gains.
To look at one metric, in recent weeks we have seen a handful of private equity trusts, from HgCapital (HGT) to Oakley Capital Investments (OCI), announcing that they have successfully sold off assets, something that offers hope that funds can still shift holdings at a profit.