Investment company activist Asset Value Investors has scooped up a £27m stake in Chrysalis Investments (CHRY ), making it the largest shareholder as the the growth capital fund looks to build on a strong recovery in the past year and put the trauma of its 2022 crash behind it.

Stock exchange filings show AVI bought a 5.7% stake in Chrysalis on 27 February, two-and-half weeks before the investment company passed a continuation vote with the support of 97% of voting shareholders.

Most of the stake is held in AVI Global (AGT ), the £1bn investment trust managed by AVI chief executive Joe Bauernfreund which specialises in buying out-of-favour closed-end funds and holding companies.

The filings indicate just over 2% of AGT’s assets are in the late-stage private equity fund run by ex-Jupiter fund managers Richard Watts and Nick Williamson.

This puts AVI in the driving seat to ensure Chrysalis continues to prioritise shareholder returns and narrows its wide discount.

The shares have staged an impressive recovery in the last 12 months, rallying 60% on hopes for interest rate cuts, and the flotation of holdings such as credit provider Klarna that could fund a £100m share buyback programme.

However, they are still less than a third of their peak in September 2021 and trail 45% below net asset value (NAV).

‘With a maturing portfolio and potentially more supportive IPO markets ahead in 2024 and 2025, we believe Chrysalis is at a key inflection point with scope for material NAV upside from what is now significantly more conservative carrying values for its key assets,’ AGT’s head of research Tom Treanor said in a statement to Citywire.

‘While the new capital allocation policy ensures that the next £100m of exit proceeds will be deployed into share buybacks that will be highly accretive given the very wide prevailing discount to NAV, we look forward to continuing our constructive dialogue with the board – as the company’s largest shareholder – on what a longer-term capital allocation policy might look like.’

The purchase comes not long after managers Watts and Williamson spun off the the £887m portfolio from Jupiter which they manage at their new firm, Chrysalis Investment Partners.  

This is the second time in the past year that AVI has emerged with a big holding before a continuation vote. In September it hiked its position in Hipgnosis Songs Fund (SONG ) to 3.1% a month before two key shareholder meetings. It successfully led investor opposition to a controversial asset sale that saw the company lose the continuation vote, prompting a strategic review under a new board.