Tap into investment trusts to profit from private equity

The investment companies providing access to unlisted firms’ robust growth are looking cheap, says Max King

Blue oval sign at one of many Boots branches in London
Boots is seen as an example of the private equity sector’s financial engineering
(Image credit: Getty Images)

According to the Association of Investment Companies (AIC), the private equity trust sector has produced the best share-price returns of any sector over one, five and ten years. Over five years, it has done nearly twice as well as the second-best sector, North America, and over ten years, at 534%, nearly two-and-a-half times as well.

Yet private equity trusts trade at some of the widest discounts to net asset value (NAV) in the market, averaging 21% for directly investing trusts and 37% for funds of funds (as of 3 April). Admittedly, the data is distorted by the giant 3i, trading at a 49% premium and with 73% of its asset value accounted for by a single investment, European discount retailer Action. 3i is the best-performing of the private-equity trusts, multiplying investors’ money nearly tenfold over a decade.

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Max King
Investment Writer

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.