ICG Enterprise Trust calls 60% shares-NAV discount ‘anomalous’

“We are firm believers that discounts are way too large,” said Oliver Gardey, head of the private equity funds group, during the firm’s interim results presentation today. “We think that the discounts you're currently experiencing in the market are way too big and creates a great buying opportunity for the sector.”

ICG Enterprise Trust is currently trading at around 1,000p per share versus an 'NAV per share' of 1,852p as of end-July.

Gardey attributed the big discount to investors not having strong confidence in the trust’s portfolio companies and the general perception that private equity is riskier than publicly traded equity.

He countered by pointing out that ICG Enterprise Trust – via its primary, secondaries and direct investments holdings – was able to show an LTM revenue and EBITDA growth of 27.5% and 26.3%, respectively, for its top 30 companies in H1 FY23. Additionally, its top 30 portfolio currently trade at an around 14.5x EBITDA multiple.

However, Managing Director Colm Walsh acknowledged that the economic environment in Europe is not as positive as the same time last year, with the strong financial performance of its portfolio companies unlikely to be sustained.

“It's possible that there's a little bit of softening, but I don't have any specific worries about material changes at the outlook for our companies,” Walsh said. “The kind of themes that we've backed… are continuing to demonstrate resilience. When I look at our largest exposures, there are none that particularly worry me,” he said.

Among portfolio companies showing resilience is US private schools Endeavor, Walsh said, adding that its biggest costs can be passed through to customers because of its strong market position.

ICG Enterprise Trust characterises itself as a “defensive growth” investor, deploying capital in businesses that are profitable and cash generative, and that can deliver strong and resilient returns across economic cycles. It typically seeks companies with attractive market positioning, providing mission-critical services to their clients and customers, ability to pass on price increases, and structurally high margins.

Its largest investments in H1 FY23 include US enterprise software provider Precisely, UK management consultant Newton, and German high performance ceramics manufacturer CeramTec.

Elsewhere, the firm is “particularly” attracted to the secondaries market over the next 12 to 18 months with discounts of up to 10-15% for quality managers, said Gardey.

“We're seeing an absolute record amount of secondaries in the pipeline, and we believe that this will continue over the next 12 to 18 months,” he said. “Every intermediary you talk to in the secondary market is inundated with deal flow…. the supply-demand balance is quite healthy, and [it] is very much a buyers' market."

The burgeoning market for secondaries comes as institutional investors face the denominator effect, with LPs having to rebalance their illiquid portfolio allocation in light of the fall in their equity and bond holdings, he said.


[Editor's note: The fifth and the tenth paragraphs have been amended post-publication to clarify that the period being referenced is H1 FY23.]

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• Topics
• Funds
• UK / Ireland
• Fund-of-funds
• Secondaries
• Intermediate Capital Group PLC
• United Kingdom