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F&C Private Equity Trust plc

Overview

F&C Private Equity Trust plc is a fund of funds, investing in private equity through making primary commitments, secondary commitments and direct investments. Investments are well-diversified by industry, size of company, geography, stage of development, transaction type and management style.

F&C Private Equity Trust's objective is to achieve long-term capital growth through investment in specialist private equity funds, on a primary and secondary basis, as well as selective co-investments in private companies. The Trust can invest globally across the private equity spectrum but has a bias towards the European mid-market buyout niche.

F&C Private Equity Trust pays an annual dividend equivalent to 4% of Net Asset Value. The dividend is calculated every six months and paid in two semi-annual payments in May and November, funded from a combination of the Trust's revenue and realised capital profits.

 

  • Fund-of-funds, London-listed
  • Investment focus: global with European bias
  • Deal focus: LBO/MEZZ/VC
  • Dividend: paid semi-annually

Key financials

Manager Overview

The Board has appointed F&C Investment Business Limited (‘the Manager’), a wholly owned subsidiary of F&C Asset Management plc (‘F&C’), as the Company’s investment manager. F&C is a wholly owned subsidiary of Bank of Montreal (‘BMO’) and is part of BMO Global Asset Management.

The BMO Global Asset Management (EMEA) private equity business, known as BMO PE, manages F&C Private Equity Trust through the Manager. BMO PE has been investing continuously in European private equity for more than 20 years and is a highly experienced specialist private equity business with a team that has a proven ability to identify and access strong performing prime/emerging managers across a range of strategies. Over the years BMO PE has developed a wide network of contacts in the private equity sector. Members of the team hold a number of seats on advisory boards or committees of funds and direct investments. Together they have a broad experience covering direct private equity, smaller companies, international equities and management of performance driven investment vehicles.

As at 31 December 2016 the Company's net asset value ('NAV') was £259.5m giving a NAV total return over the quarter of 10%.

Hamish Mair, Investment Manager

Market commentary

The prevailing theme in the European private equity market at present is that pricing of new deals is edging towards historic highs. This is a function of large fund raisings having added to so called ‘dry powder’ as well as the combination of a fairly liquid banking sector and proliferating debt funds. The net result is that both the equity and debt components of buyouts are readily available. There are obvious risks of overpaying in such an environment. Fortunately the elevation of prices is markedly less acute at the lower mid-market where most of our commitments, whether to funds or co-investments, are made. This can be seen by the moderate pricing of the new deals in our portfolio. Secondly, the managers we invest with are all well aware of the importance of maintaining pricing discipline. Whilst it may seem strikingly obvious, our own performance data shows there is a very strong correlation between paying a low or moderate price and achieving a high return. A feature of this portfolio over the years has been the very extensive list of niche industries in which the portfolio companies are involved. These companies have been selected from thousands of opportunities principally for their growth potential. This combination of moderate pricing and high growth potential may be temporarily harder to find but because of the skills and networks of our investment partners it remains definitely possible. The other vital ingredient of investment success is the confidence of businesses and investors. Notwithstanding the substantial political shocks of 2016 this remains at good levels. Private equity investors tend not to react reflexively. It is a naturally deliberative investment activity with long lead times, long holding periods and the opportunity to plan and adapt is one of its key strengths. Following a strong year in 2016 F&CPET is well placed to continue to increase shareholder value in 2017.

Hamish Mair

15 March 2017

 

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