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Digitalisation and growth

Carnegie Listed Private Equity returned 4.0 percent in June, and is up 25.6 percent from the start of the year. The best performers this month were Chrysalis, Ares Management, Apollo and Oakley Capital.

The strategies that have performed best during the year are fund companies and distressed (specialists in turning around companies with profitability problems). Performance was normal for direct investors, fund portfolios, technology and credit focus, but infrastructure investors have had a weak time this year. With the great interest in investing in private equity, fund companies have an extra advantage by both creating returns through investments and gaining value growth by raising new money.

Private equity investments in portfolio companies with profitability problems can provide a particularly large payback for the expertise of developing companies and turning them from loss to profit. German Aurelius is our best holding for this strategy, and has risen 50 percent this year. We see a number of underlying portfolio companies with strong value growth once they reach out globally with successful business models. These are often digital companies. One of our larger holdings, Apollo, has a typical example of how a traditional portfolio company digitalises and grows with profitability. It is now selling education publisher McGraw Hill, which has been transformed, and its books for university courses are now 80% digital.

This year’s rise for the fund is above historical averages following a somewhat hesitant 2020. Seen over 5 and 10 years, the fund has generated 20.2 percent and 14.7 percent respectively in annual returns, and the value has increased more than five-fold since inception in October 2009. We have had a lot of contact with our holdings, not least in our ongoing ESG work. The active ownership model is, as always, a strength in how to support portfolio companies, but there is also clear improvement other areas of ESG, with a special focus on environmental work. In other respects, our holdings provide a positive view for the future and the opportunities to develop companies and create value growth. There is a lot of activity and there are many inquiries from company buyers.

 

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