New investments may still be thin on the ground for private equity trusts but they have found one thing worth buying: their own heavily-discounted shares.

Data from the Association of Investment Companies (AIC) shows the private equity sector has slumped to an average discount of 50%, reflecting concerns about rising borrowing costs and overly optimistic private asset valuations in recent years.

However, boards and managers have been taking action with a raft of share buybacks that not only aim to narrow the discounts but form part of a strategy to take advantage of cheap share prices.

One of the most high-profile buybacks of recent years has been Pantheon International (PIN ), whose chair John Singer said the sector had failed to keep up with the changing needs of stakeholders. The trust picked up the ‘Best Board’ award at Citywire’s 2023 investment trust awards as a result of these actions.

The £2.2bn PIN portfolio has been buying back shares since 2023 but the trust still trades on a 45% discount. This prompted the board to allocate a further £35m to buybacks in March, bringing the total number of shares bought this year to £50m.

At the end of April, a total of £20.2m had been deployed versus £5m to new investments. However, buybacks only added 0.5p to the net asset value (NAV) in March, and the overall portfolio fell 2.4p, equivalent to 0.5%.

The board said it remains committed to ‘stimulating demand’ for the shares and is ‘confident in the valuations’ of the portfolio, which were up 6.3p per share in March, while foreign exchange movements detracted. 

Oakley navigates challenges

Oakley Capital Investments (OCI ), the £1.2bn portfolio that is run by European private equity investor Oakley Capital, has allocated a further £30m for buybacks this year. This follows a recent commitment to repurchase at least £20m of shares a year in lieu of its now scrapped nominal dividend.

The board said the increase in buybacks is based on ‘its assessment of current liquidity and the improved prospects for future proceeds’.

In a March update, the fund – which is the equity backer of listings magazine Time Out (TMO) – confirmed its NAV grew 2.1% over the first quarter, while its shares fell 5%.

Oakley Capital partner Steven Tredget said the portfolio companies had weathered economic challenges thanks to ‘robust demand for their products and services’. He added that manager Peter Dubens is currently trying to establish the potential impact of US tariffs.

‘Preliminary analysis suggests that only approximately 2% of total portfolio revenues are directly exposed to proposed US tariffs, owing to the European and predominantly services-based nature of the underlying businesses,’ he said.

Dubens made £6m of investments in March, pumping more cash into ACE Education, as well as a ‘strategic partnership’ with Bridewell via one of its fund holdings to ‘create an independent European leader in cybersecurity services’. OCI is expected to invest £25m in Bridewell when the transaction completes during the first half of the year.

HarbourVest buoyed by Wiz takeover

HarbourVest Global Private Equity (HVPE ), a £3.3bn portfolio trading at a 42% discount, made no new investments in March. However, it was active buying back stock, snapping up $9.7m (£7.3m) worth of shares which resulted in $0.08 per share accretion to NAV.

Since September 2022, a total of $188m worth of shares have been bought back, adding 4.1% to NAV over that period. A total of $131m has been placed in HVPE’s ‘distribution pool’, which is a dedicated fund used to accumulate capital to return to shareholders through share buybacks and special dividends. 

While the fund may not have made any new investments, M&A activity in the portfolio pushed the NAV 3.4% higher. The most significant takeover was Alphabet’s acquisition of cybersecurity business Wiz for $32bn. Although the transaction is yet to complete the fund enjoyed ‘a value uplift based on the announced acquisition price’.

Molten banks £135 from exits

Molten Ventures (GROW ) said it was balancing ‘the pipeline of new investment opportunities with the ability to drive returns to shareholders through share buybacks, while maintaining sufficient reserves’.

The £495m portfolio of early-stage tech firms completed £15m of buybacks over the year to the end of March. It also kicked off an additional £15m share buyback programme in mid-March to tackle its eye-watering 58% discount.

In a trading update ahead of the full-year results, the group said it expects the NAV to rise to 671p from 662p, following £135m of cash realisations from M-Files, Endomag, Perkbox, Graphcore, and a partial realisation from Revolut.

Molten invested £73m over the period, up from £65m in the previous year, across new and follow-on investments.

While the year provided attractive opportunities, Ben Wilkinson, who runs the self-managed fund, acknowledged the volatility created by recent macro events.

He said the portfolio remains ‘focused on capturing long-term opportunities’ from businesses that are set on disrupting global industries. The fund’s strong cash position also means it can change course when needed.

‘We remain focused on what we can control and continue to invest with discipline, finding opportunities in changing environments, backing businesses that are building for the long term and creating value for our shareholders,’ he said.

NB Private Equity poised for opportunities

Another listed private equity fund which has been buying back its own shares is NB Private Equity (NBPE ), which currently trades on a 36% discount to NAV.

It repurchased 624,000 shares for $12.3m between the start of March and 25 April, having earmarked $120m for buybacks at the beginning of the year. This resulted in NAV accretion of approximately $0.10 per share

The £955m fund, run by Neuberger Berman’s Peter Von Lehe, reported a 1.5% increase in its NAV in 2024, driven by higher private valuations which offset quoted holdings and FX drag.

The private portfolio value increased 6.9% in 2024, with $179m of proceeds from realisations leaving it ‘well positioned to take advantage of investment opportunities’ with $283m of cash and undrawn debt.

‘Despite a more challenging environment for private equity exits, NBPE delivered solid realisations in 2024,’ Von Lehe said.

Another $47m of proceeds were received over the first three months of this year, with the fund exiting US insurance and employee benefits broker USI and Kyobo Life Insurance, alongside partial realisations from other companies.

Literacy Capital is ‘disappointed’

Literacy Capital (BOOK ), the £228m investor in UK unquoted companies which won the ‘Best Private Equity Trust’ at Citywire’s awards last year, hasn’t bought back shares like its peers. However, the fund highlighted it as an option in light of its 26% discount.

In a quarterly update, manager Richard Pindar reported a 3.8% NAV increase over the first three months of the year to 511.5p per share. The largest contributor for the third consecutive quarter was transport software group Velociti, which is now the second largest holding in the fund.

The trust deployed £7.4m of capital in the quarter, including a majority investment in Trinitatum, a test automation business in the energy and financial trading markets.

The trust also donates a percentage of its NAV to the Bookmark Reading Charity, and has donated £11.6m since the fund was launched by former Capita boss Paul Pindar and his son Richard in 2021.

Richard Pindar said he has seen an ‘increase in opportunities to invest in resilient businesses, with relatively little competition from other investors, that offer the potential for strong returns’.

However, he said the overarching lack of certainty in the market creates a more challenging environment for realisations. The first quarter marked the fewest private equity exits since first quarter 2023.

He added that he was ‘disappointed’ with the 13% fall in the share price this year, which is ‘not reflective of the company’s progress’.

‘Buybacks remain an option, if additional marketing efforts do not reduce the current discount and this is considered the best use of the company’s capital,’ Pindar explained.