The private equity sector has been the standout performer this year, according to a new research report by broker Stifel. The study highlighted the best and worst performing investment trusts in a third quarter sector review, and the results show that investors have increasingly been drawn to private equity for net asset value (NAV) growth.
UK small caps and UK real estate also performed well, while the poorest performing segment was from trusts with considerable exposure to China, particularly those with a Chinese tech leaning.
PRIVATE EQUITY OUTPERFORMS
Three private equity trusts recorded particularly strong results. NB Private Equity (NBPE), produced NAV growth of 22% in the first half to 30 June, and a further 4.6% increase to the end of August. The trust’s discount has narrowed from 29% to 17% during the third quarter (Q3) to 30 September.
Apax Global Alpha (APAX) and ICG Enterprise (ICGT) also delivered strong share price returns as their discounts narrowed over the quarter from 17% to 4% and from 25% to 13% respectively.
Investors have adopted a more positive attitude towards geared plays on the UK real estate sector. This optimism has been predicated on the belief that property valuations would be sustained, and that loans would perform or would have reasonable downside protection. GCP Student Living (DIGS) recorded a 31% share price increase during Q3.
CHINA CONCERNS
The list of largest price fallers within the investment trust universe over Q3 is dominated by funds with significant exposure to China. The top three underperformers are JPM China Growth and Income (JCGI), down 28%, Ballie Gifford China Growth (BGCG), 26% lower, and Fidelity China Special Situations (FCSS), which lost 24%.
The increasingly draconian policies adopted by the Chinese government particularly towards the technology sector have negatively impacted the performance of these funds. The marked decline in the share prices of Alibaba and Tencent have been a major contributor to the underperformance.
