ICG: Bumper results may not last

The bumper results of three listed private equity vehicles suggest that the public markets remain positive about the asset class, although ICG chairman John Manser believes the coming year will see a downturn in performance.

Two listed trusts managed by Electra Private Equity and Standard Life have recorded healthy half-year results, continuing the strong performance of private equity investment trusts. However, UK-listed mezzanine provider Intermediate Capital Group has warned that there may be challenging market conditions ahead, despite recording record results for its own financial year.

Standard Life European Private Equity Trust, a listed European fund of funds, said its net assets now stood at £327 million €482 million; $651 million), up from £289.8 million, sending net asset value per share up 12.7 percent to 205.3 pence. Its share price, which rose 31 percent during the period to 240.8 pence, has now risen 183 percent in the last five years. It also made four fund commitments during the period, investing £113.0 million in the new funds by Apax Partners, Coller Capital, CVC Capital Partners and Terra Firma.

Electra Private Equity also enjoyed a strong start to its financial year. Its portfolio increased in value by 65 percent last year, while the trust provided its shareholders with an 18.3 percent return during the period. Net asset value rose 17.2 percent to £18.11 per share over the last six months, sending the share price up 16.9 percent. Its share price has also been a strong performer over the long term, increasing 160.8 percent in the last five years.

Both managers expressed cautious optimism about the year ahead, in marked contrast to the pessimism of John Manser, chairman of Intermediate Capital Group. Despite recording record pre-tax profits for the year of £224 million, up 37 percent from last year, and almost doubling assets under management to £5.8 billion, the mezzanine specialist said “excess liquidity” in the credit markets could lead to “challenging” market conditions.

“We expect prices and structures to get worse before they get better,” Manser said. “We are finding ourselves turning down many more transactions because risk is not being recognised or properly priced, and there is often little or no margin for error. Therefore it is possible that our balance sheet may fail to grow and even if it does grow, net interest income may fall as spreads tighten.”

ICG shares fell by as much as 11.5 percent after Manser’s statement, before later rallying slightly. At 12:40 GMT today, ICG shares were trading at 1708 pence, down 30 pence, giving the company a market capitalisation of £1.2 billion.