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Optimistic despite nervous market

After a long period of gains, stock markets turned downward in September and all major indices outside Japan and China were negative. As in previous periods of turbulence, Carnegie Listed Private Equity held up well and delivered higher returns than all similar funds, indexes for listed private equity and stock market indices outside China and Japan.

The best performers were Standard Life Private Equity Trust, JAFCO Group, Apax, Ares Capital, Apollo and Softbank. Published quarterly reports have shown good value growth and divestments significantly above book, such as when Standard Life reported an average uplift of 29%. A steady stream of positive news and high-level divestments contributed to the performance.

Apax portfolio company Thoughtworks is another example, which at the stock exchange listing reached a value 89% above book. High and growing dividend rates are also a good thing, with Ares Capital one of the best at 8% yield.

We are seeing an increasing number of underlying portfolio companies in growing industries and with digital business models. Apollo has announced that the acquisition of Yahoo has been approved and will be able to be further developed as an independent company with 900 million active users per month. Apollo is regarded as opportunistic and often succeeds in making acquisitions at attractive values, as was the case with Yahoo.

As a value investor, we seek to invest in companies with clear values and high quality. We are convinced that this management style will continue to deliver good long-term value growth and resilience in nervous stock markets.

Values have fallen slightly, which may mean potential for upward revisions if future outcomes exceed market expectations. We are optimistic about the potential for Carnegie Listed Private Equity to deliver good value growth going forward. Underlying portfolio companies are developing well, and financing opportunities are good at low interest rates. There is very substantial attraction towards investing in Private Equity, and our fund companies still have strong flows into new funds.

 

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