Investment trusts that should profit from private equity
Private equity has recovered steadily from its spring slump, but still offers value. Max King casts his eye over five investment trusts specialising in this promising sector.
Shares in the listed private-equity sector have recovered steadily from their sharp falls, although many still trade at tempting discounts to net asset value (NAV). However, whereas the NAVs of trusts investing in listed equities are updated daily, those of private-equity trusts are calculated infrequently and even then may be based on a valuation point several months in arrears.
Despite some updated valuations and stockbrokers’ estimates for others, the numbers remain uncertain. Many businesses have been directly affected by the lockdown, others indirectly, and some have even done well out of it. Nobody knows how long it will take for business to return to normal, or even what that “normal” may look like. That presents investors with both opportunity and risk.
It’s not 2008 all over again
Myrto Charamis of Numis Securities argues that the sharp falls in share prices reflected the view of many investors that the sector represented equity exposure leveraged by debt and commitments to invest, as in 2008. However, “the majority came into this crisis better capitalised than in 2008, with few utilising leverage and commitments being modest”.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
He expects the negative impacts to come firstly from a decline in the equity multiples of comparable listed companies (these are used to value private-equity funds’ holdings) and secondly from the impact of the pandemic on earnings. Mitigating factors are “the sector’s focus on defensive areas such as technology, healthcare and consumer staples, and resilient underlying assets”.
The share price of 3i Group (LSE: III), the £8bn giant of the sector, slumped in the first quarter as investors feared the impact of the pandemic on investments such as Action, the fast-growing European discount-store chain, which accounted for 40% of NAV at year-end and was valued at 18 times earnings. In fact, 3i has reported a NAV of 804p, much better than expected, with the Action valuation only reduced to 17 times earnings. The vast majority of its stores had reopened by mid-May and were trading well. A number of other investments, including Audley Travel, have been adversely affected, but 3i is optimistic longer term. The shares trade 3% above Christopher Brown of JPM Cazenove’s estimated current NAV of 818p, which is good value by past standards.
HgCapital Trust’s (LSE: HGT) tech-heavy portfolio has insulated it from the economic impact of the pandemic, though half-year results to 31 March still showed a 6.2% fall in NAV to 236p, with 5% growth in portfolio profits cancelled out by an 11% fall in the valuation multiple of earnings. The resulting small premium, combined with a good medium-term outlook for the portfolio, makes HgCapital Trust one of Brown’s favourites.
A clear standout
Within the fund of funds subsector he describes Pantheon International (LSE: PIN) as “a clear standout, with the most robust balance sheet and the widest implied discount”, though the shares have recovered to 2,075p, a 24% discount to NAV. About 90% of underlying valuations date back to 31 December, but Pantheon deducted an 8% provision, 226p per share, to arrive at its NAV.
Its fund-of-funds rival, HarbourVest Global Private Equity (LSE: HVPE), appears similarly cheap on a 23% discount with 81% of the portfolio last valued at 31 March and the 10% in quoted equities at 31 May. The average first-quarter decline in valuation was only 7.3%, much of which may have been recovered by now. Its strong record and focus on high growth and venture-capital investing makes it another of Brown’s favourites.
Oakley Capital Investments (LSE: OCI) is the preferred pick of Conor Finn at Liberum. At 214p, it languishes on a 38% discount to the 31 December value of 345p per share, but Finn points out that after several realisations in the last six months, the trust has net cash of 78p per share. If the cash is stripped out, the investments are valued at a 49% discount. Among Oakley's investments, Time Out will be suffering at present but Inspired (private schools) has, fortunately, been sold at a very good price so this discount seems excessive. The sector may no longer be in the bargain basement, but there is still value in an important area of the market.
Get the latest financial news, insights and expert analysis from our award-winning MoneyWeek team, to help you understand what really matters when it comes to your finances.

Max has an Economics degree from the University of Cambridge and is a chartered accountant. He worked at Investec Asset Management for 12 years, managing multi-asset funds investing in internally and externally managed funds, including investment trusts. This included a fund of investment trusts which grew to £120m+. Max has managed ten investment trusts (winning many awards) and sat on the boards of three trusts – two directorships are still active.
After 39 years in financial services, including 30 as a professional fund manager, Max took semi-retirement in 2017. Max has been a MoneyWeek columnist since 2016 writing about investment funds and more generally on markets online, plus occasional opinion pieces. He also writes for the Investment Trust Handbook each year and has contributed to The Daily Telegraph and other publications. See here for details of current investments held by Max.
-
Annual house price growth halves to 3.5% – ONS
Average UK house prices rose by just 3.5% in the 12 months to April, as stamp duty changes deterred buyers. What’s the outlook for the rest of 2025?
-
Nationwide pays £100 to millions of people – have you received the payment?
Nationwide has started paying its £100 Fairer Share bonus and expects to complete payments by 4 July. We look at who will get it and when.
-
The British railway industry is in rude health – here's why investors should jump aboard
The railway industry has bounced back from the devastating impact of the pandemic and is entering a new phase of development – and profitability
-
Unloved alternative trusts are going cheap – should you buy?
Opinion Alternative trusts like infrastructure and real estate funds are trading at huge discounts. Investors should take advantage, says Rupert Hargreaves
-
AGMs: a unique selling point for investment trusts that investors should capitalise on
Opinion Shareholder meetings aren’t just a regulatory requirement – they are a way to communicate with investors
-
Aberforth Smaller Companies Trust: a fund that lets you buy Britain on a triple discount
Opinion If UK stocks return to favour, Aberforth Smaller Companies Trust, a value-focused investment trust, should perform well, says Max King
-
Infrastructure investing: a haven of stable growth amid market turmoil
From booming construction in emerging markets to digital and green transitions, the infrastructure sector offers security, returns and long-term opportunities
-
The costly myth of “sell in May”
Opinion May 2025's strong returns for US stocks have once again shown that putting too much weight on seasonal patterns will only make investors poorer, says Max King
-
Vietnam: a high-growth market going cheap
Opinion The threat of tariffs has shaken Vietnamese stocks, but long-term prospects remain solid, says Max King
-
Who’s driving Tesla?
As Elon Musk steps back from government with his eyes on the stars, investors ask if he’s still behind the wheel at his electric-car maker.