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Private Equity Investment Trusts

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  • TCA
    TCA Posts: 1,604 Forumite
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    Thrugelmir wrote: »
    Private equity companies are having difficulty offloading their investments. Has been the case for a while now. Days of flipping appear to be over.

    Revisiting private equity and interesting to read the remarks from the Dunedin trust last Friday. Not sure I believe their optimism though:

    Fri, 7th Nov 2014 10:09
    LONDON (Alliance News) - Dunedin Enterprise Investment Trust PLC Friday said it now expects the market for making exits from investments to be strong in 2015.

    "The forecast strengthening of the UK buyout market in the second half of 2014 is not now expected to materialise until 2015," the trust said in a statement.

    The trust's outlook came as it reported a 0.6% in its unaudited net asset value per share in the three months to the end of September, when it was put at 501.7 pence. Dunedin Enterprise Investment Trust shares were up 0.2% at 362.00 pence on Friday.
  • Thrugelmir
    Thrugelmir Posts: 89,546 Forumite
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    TCA wrote: »
    Revisiting private equity and interesting to read the remarks from the Dunedin trust last Friday. Not sure I believe their optimism though:

    Lots of share floats have been pulled recently. With refinancing of debt very cheap. Possibly less incentive at the moment.
  • TCA
    TCA Posts: 1,604 Forumite
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    Thought I'd give this private equity thread a bump in light of the semi-relevance to the Woodford Patient Capital Trust IPO. I haven't yet bought any private equity trusts but thinking now that WPCT might give me a semblance of the exposure I'd like. Buying WPCT along with something like Standard Life European Private Equity Trust (SEP), might give some quite nice coverage.

    What are the thoughts of anyone currently holding private equity and looking to buy WPCT?
  • bowlhead99
    bowlhead99 Posts: 12,295 Forumite
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    The Woodford fund gives some exposure to the venture capital end of the private equity spectrum. Once they've spent a couple of years assembling the portfolio (which won't happen on day one), they'll reduce to just a quarter of the fund being in general medium and large listed companies. A further quarter will be in early growth companies (generally listed). Then the other half should be in early stage companies (some listed, presumably many not listed and therefore impicitly 'private equity').

    They have said that potentially the trust would be the largest investor in some of the companies. But they haven't said they are necessarily going to control the direction of those companies or be hands-on, other than providing finance. They will have 50-100 positions altogether in their £200m fund, including the listed stuff, so it is not clear exactly how many and exactly how much they will be investing in each of the private investees, and whether they will lead the investment process or just co-invest in a funding round with another VC manager leading it.

    So, WCPT is definitely going to give you some sort of exposure to VC activity and early stage companies. That is quite different to SEP who are making commitments to investee funds that conduct mid-market buyouts (some larger - transaction sizes from 100m to low billions). SEP don't have any VC.

    So, potentially WPCT could complement SEP. SEP is wider Europe of course, rather than just UK. There are other even broader funds-of-funds which give more global coverage than SEP and cover a wider spectrum of deals. For example PIN is global (only 30% Europe) and has 25-30% in each of large/mega buyout, small/mid buyout, venture/growth and then some individual coinvestments and specialist holdings.

    I guess WPCT with its smallcap/ early stage focus would better complement a fund that doesn't have very much of that going on. But if you stacked it with SEP you would only be playing in the UK/Europe mid buyout and the UK venture scene, which is still not a global view - given that the US is the largest and most established market for PE and VC and Asia is of growing importance.

    FWIW I will probably add the Woodford one at IPO for 2-3% of my portfolio. It is a specialist fund with focus on small growth companies and so the natural thing to do would be to reduce my smallcap and PE exposure to make way. However, I took quite a bit of my UK smallcap money off the table in the last year to 18 months, which is part of the reason I'm interested in it - so I don't have much to trim in UK smallcap. Therefore most of the money will come from reducing PE or other specialist funds.

    My global PE holdings at the moment are HVPE, PIN and APEF although I do have some others in the alternative investment space that I could slice from. I might reduce HVPE (because I have more of it than the other two) or APEF (because it's not as diversified as the other two) or PIN (because it has a slightly lower discount than the other two).

    The WPCT thread is here https://forums.moneysavingexpert.com/discussion/5170560
  • TCA
    TCA Posts: 1,604 Forumite
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    bowlhead99 wrote: »
    It is a specialist fund with focus on small growth companies and so the natural thing to do would be to reduce my smallcap and PE exposure to make way.

    Thanks for the usual comprehensive reply bowlhead. Small caps is another segment I'm lacking (other than Asia through Aberdeen) and have been keeping an eye on the likes of SLS, BRSC and ASL. With the advent of the new Woodford trust, I'm inclined to buy into that and put these on the back burner for a bit.
  • redux
    redux Posts: 22,976 Forumite
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    I'm a bit surprised that the larger ones haven't been mentioned, such as Electra or 3i.

    I've had some Electra in my pension since it became available in the Fleming (now JPMorgan) investment trusts pension account.

    I can't tell you about its holdings and policies, as I haven't paid a lot of attention recently. It was dented in 2008/09 like everything else, but is up substantially since then or when I started, and seems to increase more steadily than 3i.

    I wonder if anyone has any opinions on it or 3i from here?
  • bowlhead99
    bowlhead99 Posts: 12,295 Forumite
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    Electra is quite a bit different from something like SEP as it's predominantly direct investments (70%) with only 20% to funds (including secondaries). NAV of over a billion so it's quite large, they're a decent and credible group.

    3i has a very long history and is a bit of an outlier as it is a bit of a conglomerate, you are investing in the fund management company and its own proprietary investments as well as a whole variety of individual holdings via the various funds that they run for third party investors. They have had some management and strategic changes in recent years. If you look at some of the morningstar performance stats via LPEQ.com they have an "IT private equity exc. 3i" , recognising that it's not quite the same as the typical investment trust vehicle.

    I don't hold either but have a general interest in the sector from previous jobs; I think individually held private investments with sometimes curious valuation issues are more interesting to me than mainstream listed public blue chips. Not necessarily more lucrative but I do like the model.

    The listed stuff that we can access as retail investors is only really the tip of the iceberg of a big industry that serves institutional investors, governments and HNWs. Inherently the funds we get to invest in are less efficient than those investment partnerships but listed PE does diversify your assets away from traditional stock-exchange listed equities and bonds.
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