The market’s reaction to the interim trading update from FTSE 250 investment firm Bridgepoint (BPT) suggests investors aren’t at all convinced private equity is where they should be putting their money.

Despite a ‘strong’ first half, during which the firm navigated significant macroeconomic volatility, the shares tumbled over 11% intraday to 188p, taking out their closing lows of the last six months.

WHY ARE THE SHARES DOWN SO MUCH?

On the face of it, the firm – which counts Archie Norman, the former chairman of Asda, Sainsbury’s (SBRY), Marks & Spencer (MKS) and ITV (ITV), and former ITV and EasyJet (EZJ) chief executive Dame Carolyn McCall as board members – delivered a respectable first-half performance with fee-paying assets under management growing by 24% to €24.6 billion and total assets under management increasing by 6% to €39.5 billion.

In addition, management fees increased by 24% to £124.6 million and underlying fee-related earnings jumped by an impressive 91% to £42.9 million.

However, attention focused instead on the sharp drop in investment income, from £38.7 million last year to £12.7 million this year, due to a lower level of ‘exit activity’, meaning fewer asset sales.

Although the firm reiterated its expectations for investment income for this year and next year, its admission that ‘the precise timing of exit processes are not directly within our own control and inevitably have some unpredictability in current markets’ clearly unnerved investors, who sent the shares sharply lower.

Since listing in July 2021, total assets under management have increased by close to 50%, and both of the firm’s most recent fully-invested funds have enjoyed an uplift to their valuations ahead of expectations, yet the share price has slumped more than 45% from its initial offer price of 350p.

Among Bridgepoint’s UK investments are fast-food chain Burger King UK, care home operator Care UK, media firm DeHavilland, retail group Hobbycraft and fintech payments group Moneycorp.

LEARN MORE ABOUT BRIDGEPOINT

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