The UK-listed investment trust, Electra Private Equity, has indicated that it will be looking increase its exposure to debt investments and second-hand private equity assets, after portfolio exits helped to reduce its discount to net asset value (NAV) in the year ended September 2012. Electra is managed as an HM Revenue and Customs approved investment trust, and invests primarily in the private equity mid market.
The firm has a specific allocation to secondary investments and significant experience as a buyer of fund interests on the secondary market. Electra Private Equity has earned good value in secondary portfolios, and partly attributes success to distressed sellers, and the shortage of capital to pursue opportunities, which has reduced competition for deals. These factors, along with its flexible investment mandate, are enabling Electra Partners to take advantage of a number of investment opportunities, including secondary investments. As of 30 September 2012, the company held five secondary positions containing 17 investments worth an aggregate £34mn; this represented 4% of their £868mn investment portfolio.
In its results for the year to the end of September, Electra reported a 28% discount to NAV – a valuation of portfolio worth – compared with a 39% discount at the end of last September. Electra’s diluted NAV stood at 2,473p, an 11% increase over the year. Consequently, the investment trust expects to deploy more capital in the coming year to more alternative strategies, and has indicated that it is likely that the proportion of capital deployed in secondaries will increase slightly.