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Risk in LPE - Perception versus reality

The LPE discount has narrowed somewhat, partly due to strong NAV returns and corporate activity. Does perceived risk match the actual reality? Read Edison's indepth analysis on the LPE sector and the opportunities for investors. The analysis is supported by interviews with manager and investor interviews.

LPE still at a discount despite solid performance

Edison's first report published in September 2016 highlighted the large discount to NAV (net asset value) of the sector despite strong returns. Since then the discount has narrowed somewhat, partly due to strong NAV returns and corporate activity. According to the AIC the discount for the private equity sector is currently 14% despite double-digit annual returns over the last five years. The aggregate discount does not necessarily indicate value at the individual LPE company level, as some companies trade at significant premiums due to their hybrid asset manager or LPE structure, which is logically rated more highly by the market.

 

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