In focus
You must be kidding
Simon Elliott, research analyst at
Winterflood Investment Trusts, says
one reason relates to their expense.
“This is particularly pertinent since
the start of the year when wealth
managers were obliged to disclose the
Key Information Document (KID) costs
of collectives to their clients,” he says.
“Anecdotally, it appears some
wealth managers are struggling to
justify allocating to listed private
equity funds as a result. While we
are sympathetic to this reaction, we
believe it is a mistake given the return
potential of the asset class.”
With charges of 1.5 to 2 per cent
and performance fees of 20 per cent
of standard realised profits, Elliott
admits the asset class is expensive.
However, he believes these fees are
justified given the excess returns it has
generated and the level of expertise
involved in “building companies”.
“There are two main
reasons to hold the
asset class: firstly their
historical performance
track record, and
secondly the valuations
they offer”
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“Within the investment
trust space, private equity
is one of the few areas left
where you can still find big
discounts”
Best of both worlds
One fund manager who is sold on
the idea of private equity is Richard
Curling, who heads up the Jupiter
Fund of Investment Trusts. Curling
currently has 10 per cent of his
portfolio invested in private equity,
which is split between direct private
equity trusts and funds of funds.
“For me, there are two main reasons
to hold the asset class: firstly their
historical performance track
record, and secondly the
valuations they offer,” he adds.
“In a market in which it is
pretty hard to find value at
present, given that we are in the
latter stages of an extended bull
market, within the investment
trust space private equity is one
of the few areas left where you can
still find big discounts.”
Excluding 3i, the average
discount for UK-listed private
equity trusts was 18 per cent at the
end of August. For Curling there
is no logical reason for this level
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