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Upcoming event | Hardman Talks: Everything you wanted to know about private equity but were afraid to ask!

In our report, ICGT in personal pensions: do as the professionals do, published on 14 September, we explored the reasons why PE, and ICGT in particular, may be suitable for personal pensions. ICGT’s interim results, announced on 5 October, confirmed the core reason – outperformance. The NAV total return in the six months to end-July was 11.1% (37.5% YoY, 57% over three years, 111% over five years), with a portfolio return in local currency of 14.9% (48.5% YoY). The six-month realisation proceeds of £175m were higher than the average annual level for the prior five years. The 34 full exits were at a 26% uplift to carrying value and a 2.8x multiple to cost. The discount to NAV is 23%.

  • New investment activity: In total, in 1HFY’22, ICGT invested £133m, of which £101m (76%) was in High Conviction investments and £32m was in third-party fund drawdowns. Over 25 potential direct investment opportunities were generated, of which five completed (£37m). £32m was invested in a secondary deal.
  • Shareholder returns: In 1HFY’22, the share price rose 13.7%, beating the All Share index by 1.1%. Over five years, the share price total return has been 109%, against the All Share return of 32%. The second quarterly dividend was 6p
    (FY intention to pay at least 27p), and a 250k share buyback was done on 27 July.
  • Valuation: NAV valuations are conservative (uplifts on realisations averaging 35% long term). The ratings are undemanding, and the carry value against cost modest. The 23% discount to NAV is anomalous, we believe, with defensive market-beating returns, and is above the levels seen pre COVID-19. The yield is 2.0%.
  • 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 23% discount to NAV.
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