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On 4 February, ICGT will give a quarterly update. We expect confirmation that current market conditions are favourable, and we believe 2021 investment cohorts are likely to see above-average returns. The pipeline in the “High Conviction” portfolio is expected to be strong, and this portfolio has delivered superior five-year returns. The diversified third-party fund portfolio has generated good double-digit returns, and enables favourable access to the higher-return secondary and direct investments markets. ICGT has shown active portfolio construction. The 17% discount to NAV appears to be anomalous with its long-term value creation.

  • Why 2021 is attractive: We think 2021 will offer attractive PE returns, reflecting i) weaker companies seeking strong financial backers like ICGT, ii) family owners unwilling to face further challenges, iii) non-core disposals strengthening group balance sheets, and iv) more realistic price expectations.
  • Still a balanced book: ICGT offers investors a balance between a concentrated portfolio of co-investments and third-party fund investments. In addition to diversification, the latter is a source of ICGT’s high-return co-investments alongside the third-party managers, as well as secondary transactions.
  • Valuation: Valuations are conservative (medium-term uplifts on realisations averaging 30%+ to the latest book value). Ratings are undemanding, and the carry value against cost is modest. This gives confidence that the accounting date NAV is realistic. The 17% discount to NAV is above historical levels.
  • Risks: PE is an above-average cost model, but post-expense returns are market-beating. Even though actual experience has been of continued NAV outperformance in economic downturns, sentiment is likely to be adverse. ICGT’s permanent capital structure is right for unquoted and illiquid assets.
  • Investment summary: ICGT has consistently generated superior returns, by adding value in an attractive market, with a defensive growth investment policy, and exploiting synergies from being part of the ICG family. The valuations and governance appear conservative. It has an appropriate balance between risks and opportunities. Risks are primarily sentiment-driven on costs and cyclicality, as well as the underlying assets’ liquidity. It seems anomalous that a business with a consistent record of outperformance is trading at a 17% discount to NAV.
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