Listed PE trusts: If you're focused on the discount, you'll miss the story

Focus on the advantages

Whenever I speak to investors and advisers, it is only a matter of time before I am asked about the share price discounts to NAV that listed private equity companies trade at. “What are the causes of the stubbornly persistent discounts for many listed PE trusts?” “Will those discounts ever close?” and so on.

These are important questions but, sadly, there is little industry consensus on the answers. One reason for this is that the prism through which many people look at the sector creates misconceptions that actually entrench discounts. Instead, investors should focus on the distinct advantages of investing in private equity and the real driver of shareholder returns in the sector - capital growth - as growth in NAV per share is by far the largest driver of share price performance. Regrettably, a lot of commentary on the sector asserts that discounts are the primary method for evaluating ...