Oakley Capital Investments (OCI), the top-performing private equity fund, has taken more than £170m of profits from its biggest holding in German online university IU Group.  

The £1.2bn investment company, which invests in the funds of private equity group Oakely Capital, yesterday disclosed that Oakley Fund III had sold its stake in IU Group, generating £240m of gains for OCI. The fund of funds will remain invested in IU Group, which increased in value by 85% last year, making it the portfolio’s best performer, reinvesting £67m into the business through Oakley Fund V.

Analysts said the transaction stopped OCI becoming overly concentrated in IU, while retaining exposure to the rapidly growing company. OCI’s weighting in the education technology group falls from 20% to 5.7% as a result of the deal, which boosts its firepower, leaving it with £340m of cash, including £100m of borrowing, to go towards £800m of investment commitments.  

Since 2017 when Oakley first invested £30.7m in IU Group, it said student enrolments had grown from 15,000 to more than 100,000 and its online platform offered 350 accredited bachelor and master’s courses, making it the largest portfolio of degrees in the world.

OCI said the £67m reinvestment would ‘drive the next phase of growth, focusing on accelerating internationalisation through organic growth and via acquisitions in key geographies, to further its vision of democratising education’.

Numis analyst Ewan Lovett-Turner said third party investors were also involved in the deal which provided support and validation for the valuation. 

IU Group generated half of OCI’s investment return last year, adding 64p to net asset value (NAV) per share which annual results in March showed rose 128p, or 24%, to 662p. Almost two thirds of the peformance was driven by growth in earnings by the technology, consumer and education groups backed by Oakley, which was founded by early Internet investor Peter Dubens in 2002. The other third came from higher valuation multiples applied to the businesses, primarily when stakes in them were sold. OCI generated £234m from the sale of five stakes in 2022.

Latest figures

A first quarter update last month said the portfolio companies continued to trade robustly despite the challenging economic conditions. Including dividends, NAV grew 1.25% to 668p in the first three months of the year.

Despite the lack of bad news, like most London-listed private equity funds, at 477p yesterday, OCI shares trailed on a wide 27% discount below Numis’ estimate of 662p NAV per share, which Lovett-Turner said ‘offers exceptional value’ particularly given the reassurance of valuations provided by the IU Group transaction.

Although the discount meant the shares barely reflected OCI’s underlying growth last year, the company, which has a market value of £842m, provided a total shareholder return of 193% in the past five years. As recently highlighted by our columnist James Carthew, this is the best performance of any private equity investment trust. It is also the second best of all UK investment companies, behind Rockwood Strategic (RKW ), the recovering small smaller companies fund which has shot up 206%.