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Our July initiation, Outperformance through every stage of cycle, highlighted how investors got liquid access to the attractive PE market with incremental manager synergies. To its last reported NAV (April), ICGT delivered a 10-year total NAV return of 178% (FTSE All-Share return 61%). Since Intermediate Capital became the manager in 2016, it has earned mid-teen underlying returns every year. It has a concentrated portfolio of “high-conviction” investments (19% p.a. average five-year return, 42% of the portfolio, defensive growth focus) and a diversified third-party PE funds book. The 26% discount to NAV seems anomalous with market-beating returns.

  • Peer news: Most peer underlying company valuations remain as at March. HVPE reported an NAV rise of €0.59 to €26.26 in July, driven by public holdings and FX effects. SLPE reported a fall of 9.8p in June, of which 3.3p was the dividend and the balance FX. BPET’s results showed a 4.7% NAV return in the six months to 30 June.
  • Valuation: Valuations are conservative (uplifts on realisations averaging 33% to the latest book value in the medium term). Ratings are undemanding, and the carry value against cost is modest. All this gives confidence that the NAV on the accounting date is realistic. The 26% discount to NAV is at nearly 3x recent levels.
  • Risks: PE is an above-average cost model, but post-expense returns are market-beating. Even though actual experience has been 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 26% discount to NAV.
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