Continued strong performance from Abrdn Private Equity Opportunities (APEO ) has done little to move its 44% discount leading the trust to contemplate the best use of its cash.

In September, the £664m European-focused fund of funds grew 1.6%, with net asset value per share rising to 769.4p, largely driven by a 1.3% appreciation in the euro versus sterling and a 3.7% appreciation in the dollar.

Over the month, the 3.7%-yielding portfolio paid £16.3m of drawdowns to existing commitments and received £10.8m in distributions from fund investments. With no new commitments made, cash balances currently sit at £9.5m.

Manager Alan Gauld recently told Citywire that while shareholders had been happy for them to invest rather than use capital to buyback shares, this view is starting to shift, as it has become clear the share price is not responding to its gowth. 

‘Shareholders don’t think it’s [buybacks] a panacea, but you can use it to signal NAV belief,’ he said.

The manager (pictured below) added that given the trust’s steep discount he would have to make a very strong investment for something else to be better value. 

However, there was no mention of buybacks in the announcement. 

Pressure is growing for private equity trusts to take more action given their steep discounts and APEO’s peer Pantheon International (PIN ) has been applauded by analysts for its ‘bold’ £200m buyback plan, with the board called ‘a leader’ in the space. 

The monthly update also served to reassure shareholders that the investment team will not immediately change should Patria Investments’ acquisition of Abrdn’s private equity business go ahead. 

Portfolio composition

The trust is partnered with 12 core private equity relationships, investing in their funds as well as co-investing alongside them, meaning the underlying portfolio consists of close to 700 companies.  

During September APEO trimmed its position in its largest holding, Dutch retailer Action, which makes up about 60% of 3i (III ), APEO’s coinvestor, for the third time this year, realising €34.6m of proceeds at the June NAV.

Action, which has been in the portfolio since 2011, remains the largest holding with a remaining value of £24.6m, equivalent to 1.9% of total assets.

The second-largest position in the trust is ACT, a climate transition services business that helps mid and large corporates with climate attestation, which makes up 1.6% of assets. 

The trust’s longer term performance remains strong, with the portfolio returning 100% over five years, while the shares have trailed at 54%, versus the FTSE All Share benchmark’s 28%, according to Morningstar. 

Outpacing the UK

Source: Morningstar