The manager of Oakley Capital Investments (OCI ) is confident he can meet investor’s expectations of double-digit portfolio growth in 2024 after a mediocre year. 

The £872m shop window to Oakley Capital saw its net asset value (NAV) gain 4% in 2023, of which 65% was driven by pre-tax earnings growth and the remainder by multiple expansion, or the amount investors are prepared to pay for a business.

This came after a blockbuster 2022 that saw five exits at an average 50% premium, driving total returns of 24%.

‘We’re naturally more conservative around valuation metrics in the current market environment. There’s plenty of clear air between the public market valuations and ours, but we’re relatively cautious.

‘We recognise there are expectations that OCI would be growing double-digit [NAV] at best,’ said portfolio manager Steven Tredget (pictured).

Shareholder returns of 18% were well ahead of the FTSE All Share index benchmark’s 8%, as optimism peaked on expectation of rate cuts by March. That optimism has waned in the New Year, with the shares down 7%.

Tredget noted that several businesses in portfolio are maturing this year, which should see more realisations, driving NAV and a strengthening of earnings growth.

Investment activity

Last year was by no means quiet in terms of portfolio activity, with the manager providing £175m of look-through investment, or investment to companies owned by Oakley Capital’s funds. 

Of this, £35m went to underlying portfolio companies that were snapping up smaller peers. There were 24 bolt-on acquisitions made by companies, which was a record in terms of the number of deals, according to Tredget, and was driven by how expensive debt was for the smaller private firms. 

Since the period end, OCI committed a further £100m to Spanish logistics and transport solutions provider Alerce and UK automotive services platform Steer Automotive Group, both of which should be completed by the end of the first half. 

Last year, the fund realised its position in German private university group IU Group, delivering proceeds of £240m at an 85% investment return, the trading statement showed, while it refinanced Spanish online property portal Idealista and French enterprise management software and cloud services Cegid.

Tredget added that the pipeline of investments has never been stronger, with Oakley recently opening offices in Milan and Madrid. 

‘It’s a great market to be in. Typically, funds that invest during this time outperform. There’s no downward pressure on valuations, which is great if you’re a buyer,’ he said. 

OCI has total outstanding commitments of £1bn as at the end of December, or 84% of net assets, which are expected to be drawn over the next five years. Net cash was £207m, while the fund has an undrawn revolving credit facility of £175m, resulting in available liquidity of £382m.

The board has a share buyback programme, but has not bought back any stocks since August 2022, stock exchange filings show. The shares closed at 458p on Wednesday, a 33% discount to the December NAV.

Over five years, OCI’s shareholder returns of 161% rank the fund second only to FTSE 100-listed 3i Group (III ) in the AIC’s private equity sector.

Five-year performance

Source: Morningstar