Private equity trusts are apparently back on track, delivering portfolio growth thanks to a flurry of action in the transaction and listings markets, as well as rising valuations.

The start of 2025 has brought positive news across the board for the private equity investment company sector, which has been blighted by high interest rates that increased the cost of borrowing and fueled concerns that valuations of private assets were overly optimistic.

However, updates from four investment companies this week have revealed green shoots of recovery.

Pantheon International (PIN ) is not only the largest trust providing an update, at £1.5bn in market value, but also enjoyed the biggest net asset value (NAV) increase, up 2.2% to 501.6p per share in November.

The gain was driven primarily by an uplift in the price of assets following revaluation reports at the end of September, while share buybacks of £1.5m made a small difference in November.

The fund-of-funds investment company has implemented a bold capital allocation strategy since August 2023, buying back well over £200m worth of its own shares to curtail its discount. Since that started, the discount has narrowed from around 43% to the current level of 37%.

As well as share buybacks, managers Helen Steers and Charlotte Morris committed £27.4m to new investments in ‘two European buyout funds targeting small to lower mid-market companies in the business services, healthcare, consumer and industrial sectors’.

Numis analyst Gavin Trodd said it was ‘positive’ to see another month of net cash flow for the portfolio, at £16m. Based on the current policy, he expects the board to allocate 26-50% of net cash flow to buybacks in the next six months. 

Fellow fund-of-funds portfolio Patria Investments (PPET ), the £819m trust formerly known as Abrdn Private Equity Opportunities, grew its NAV 1.8% in November to 783.2p per share. Again, that was thanks to valuation gains and buybacks. Although, the shares still trade at a 32% discount, according to Deutsche Numis data. 

Patria manager Alan Gauld flagged positive uplift in the value of wound care management business Wundex, cardiac and nuclear medicine provider CDL, health product manufacturer Chanelle Pharma, and discount retailer Action. The latter, which also happens to be held by Pantheon, has in recent years been the jewel in the crown of sector giant 3i’s portfolio. 

Patria received income of £4.1m from realisations in the underlying portfolio of companies, including the exit of Sunbelt, Polish convenience retailer Zabka, and CDL by the respective funds that held them.

Exits pick up

Private equity funds specialising in direct investments also enjoyed a pick-up as transaction activity revived.

Partners Group (PEY ), previously known as Princess Private Equity, saw its NAV grow 1.2% in November, with the key driver of returns being Indian retailer Vishal Mega Mart, which was written up ahead of its December initial public offering (IPO).

At the end of November, Vishal was valued at €65.6m (£54.7m), resulting in a 20% uplift versus October, but the fund said that only ‘partially reflects the impact’ of the IPO in December.

The share price of Vishal is up more than 40% post-flotation and Partners still retained a significant stake despite disposing of 23% of its holding pre-IPO.

Partners said the positive Vishal contribution was ‘partially offset by a decrease in the listed share price of KinderCare Learning Companies, the largest for-profit provider of early childhood education and care services in the US’.

Apax Global Alpha (APAX ), the most heavily discounted trust in the direct private equity sector at 37%, received some good news as it confirmed Nasdaq-listed investment Paycor is to be acquired by Paychex at $22.50 per share, valuing Apax’s stake at €38m – or a €16m uplift to the September carrying value.

The better-than-expected sale price adds 1.3% to the NAV.

Apax invested in Paycor, a provider of human capital management software, in 2018, and the group was taken public in 2021.

Apax manager Ralf Gruss said that over the past six years the fund has worked with Paycor’s management team in the ‘transformation of the company – accelerating its topline growth, expanding it into tier one cities across North America, and building a modern human capital management platform for the mid-market’.