Listed Private Equity: Accessing Unlisted Companies Through Investment Trusts

Private equity — the business of investing in unlisted companies — has delivered some of the strongest risk-adjusted returns of any asset class over the past three decades. Yet the traditional private equity fund structure is accessible only to institutional investors and exceptionally wealthy individuals: minimum commitments of £1m–£5m, ten-year lock-ups, capital calls over three to five years, and illiquid secondary markets. Listed private equity investment trusts — UK closed-end funds that invest in portfolios of private equity stakes and trade on the London Stock Exchange — provide a more accessible route to the same underlying exposure. The trade-offs are significant but manageable for informed investors.

Key UK Listed Private Equity Vehicles

Several investment trusts listed on the London Stock Exchange provide significant exposure to private equity, each with a distinct investment approach:

3i Group (III): One of the UK's oldest and most respected private equity firms, 3i is unusual in that it operates as a listed company itself (rather than a trust that invests in PE funds) and makes direct investments in mid-market European and North American companies. Its largest holding — Action, the Netherlands-based discount retailer — has been a transformational investment. 3i trades at a premium to NAV more frequently than peers, reflecting its strong track record and direct investment model. Market cap approximately £20–25bn as of mid-2026.

HgCapital Trust (HGT): Provides access to Hg's specialist software and technology-enabled services funds, focused on established B2B software companies in Europe. Hg is regarded as one of the strongest European PE managers. HgCapital Trust has historically demonstrated strong NAV growth and has traded at or near premium to NAV.

Oakley Capital Investments (OCI): Invests alongside Oakley Capital's funds, focused on entrepreneurial founder-led businesses in education, technology, and consumer sectors, primarily in German-speaking Europe. Has demonstrated strong NAV growth; typically trades at a discount.

ICG Enterprise Trust (ICGT): Provides diversified exposure to private equity, both through ICG's own funds and third-party PE funds across buyout, growth, and private credit strategies. Broader diversification across managers reduces concentration but may dilute best-in-class returns.

Partners Group Private Equity (PEY): Managed by Partners Group and listed on the London Stock Exchange (renamed in 2024 from Princess Private Equity), this Guernsey-domiciled, FTSE 250 vehicle provides diversified exposure to global private equity and private debt, giving UK investors access to a geographically and strategy-diversified portfolio.

Apax Global Alpha (APAX): Invests alongside Apax Partners' buyout funds and its private credit business. Broader sector exposure than sector-specialist peers.

NAV Discount and Premium: The Defining Dynamic

The most distinctive feature of listed private equity investment trusts — compared with both direct PE fund investments and listed equities — is the discount or premium to net asset value (NAV) at which shares trade.

An investment trust's NAV is calculated periodically (typically quarterly) based on valuations of the underlying portfolio companies. The market price of the trust's shares may differ from NAV — sometimes significantly.

Historical patterns:

• 2020–2021: A combination of strong PE performance, rising stock market comparables, and investor enthusiasm for alternative assets pushed listed PE trusts to trade near or above NAV.
• 2022–2023: Rising interest rates compressed private equity valuations (higher discount rates reduce DCF-derived valuations); public market comparables fell; and sentiment towards alternatives deteriorated. Most listed PE trusts traded at 20–35% discounts to NAV. At these prices, investors were implicitly buying £1 of private equity assets for 65–80p.
• 2024–2025: Discounts narrowed partially as PE realisations picked up, but significant discounts persisted in many trusts.

The discount/premium cycle creates a layer of risk (and opportunity) that does not exist when investing directly in a PE fund. Investors buying at 30% discount are acquiring assets cheaply — assuming the NAV itself is realistic. Those who buy at narrow discounts and see the discount widen subsequently face a double negative: any fall in NAV is amplified by discount widening.

The NAV Staleness Problem

PE trusts value their underlying portfolio companies on a quarterly basis using a mix of recent transaction prices, comparable public company multiples, and discounted cash flow analysis. These valuations are inherently backward-looking and smoothed relative to public markets, which reprice continuously.

During the 2022 public market selloff, PE trust NAVs initially held up relative to listed equities — not because the underlying businesses were genuinely unaffected by rising rates, but because quarterly valuations had not yet caught up. As 2023 and 2024 progressed, valuations were progressively marked down as portfolio companies were sold at prices below their previous book values and as comparable public company multiples fell.

This valuation lag means PE trust NAVs are not fully reliable real-time indicators of intrinsic value. Investors should treat reported NAVs as approximations, particularly during periods of rapidly changing market conditions.

Gearing: Amplification of Returns and Losses

Most PE trusts employ gearing — borrowing within the trust — to enhance returns. Additionally, the underlying portfolio companies themselves are typically financed with significant leverage (commonly 4–6× EBITDA at the time of acquisition), meaning the economic gearing of the portfolio is substantially greater than the trust-level borrowing.

Portfolio-level leverage amplifies returns in rising markets and amplifies losses in falling markets. The 2022 period of rising interest rates created a challenging environment for leveraged portfolio companies: higher interest costs compressed free cash flow, reducing valuations.

Investors should assess gearing at both the trust level and (to the extent disclosable) the underlying portfolio level when evaluating total risk.

Fee Layers: The Double-Charging Issue

Listed PE trusts typically involve two layers of fees:

1. Fund manager fee at the trust level: Typically 1–1.5% of net assets per annum for externally managed trusts.
2. Underlying PE fund fees: If the trust invests in third-party PE funds (rather than making direct investments), those funds charge their own management fees (1.5–2%) and carried interest (20% of profits above hurdle). These flow through as a cost of the underlying assets.

The cumulative fee drag from two layers — trust-level fees plus underlying PE fund costs — can be 2–4% per annum in total. This is substantially higher than listed equity funds and significantly reduces the net return to investors.

Trusts that make direct investments (such as 3i Group) avoid the second fee layer, though they may also lack the diversification benefits of investing across multiple PE managers.

Dividend Income and Return Profile

Listed PE trusts are primarily capital growth vehicles. Unlike equity income trusts, they typically pay modest dividends (if any), with most return expected through capital appreciation as portfolio companies are grown and sold.

The return profile over a full cycle — including the J-curve effect — has historically been strong for the best managers. But investors should not expect steady income and should hold with a time horizon of at least five years to capture a reasonable portion of the PE performance cycle.

J-Curve Mitigation Through Secondary Market Exposure

A traditional private equity fund commitment involves a J-curve: capital is called over several years, invested in companies that require time to grow, and returns only flow back in the later years. The portfolio has negative or flat returns in early years before profits are realised.

Listed PE trusts mitigate the J-curve problem by investing in seasoned portfolios rather than freshly committed funds. The underlying portfolio companies are already operational and partially through their development phase when the trust acquires exposure. This is analogous to investing in the secondary market for PE fund stakes, which similarly provides access to more mature investments.

Trusts that specifically focus on secondary market PE — buying existing fund interests from original investors who need liquidity — can further reduce J-curve effects by acquiring stakes in well-seasoned portfolios, often at discounts.

Listed PE Indices and ETFs

The LPX50 index is a global index of the 50 largest listed private equity vehicles, providing an institutional-grade benchmark for the sector; the broader LPX Composite captures the wider universe. A separate benchmark, the S&P Listed Private Equity Index, underlies the iShares Listed Private Equity UCITS ETF (ticker IPRV), which provides diversified exposure to a basket of the larger listed PE companies in a liquid, low-cost format (TER approximately 0.75%).

The ETF approach sacrifices the ability to cherry-pick the best managers — buying index-weighted exposure across the universe, including less impressive vehicles — in favour of simplicity, liquidity, and low cost. For investors seeking diversified listed PE exposure without the need to select individual trusts, the ETF route is worth considering.

Suitability and Portfolio Role

Listed PE trusts are appropriate as a long-term growth allocation within a diversified portfolio for sophisticated investors willing to:

• Accept illiquidity in the underlying (even though the trust itself is listed and liquid, underlying company sales may be delayed).
• Understand and manage NAV discount risk.
• Hold for five years or more.
• Withstand short-term price volatility associated with discount movements.

For most HNW portfolios, a 5–15% allocation to listed PE provides meaningful private equity exposure without the full lock-up of direct fund commitments.

Listed private equity investment trusts can fall in price as well as rise and investors may receive less than they invest. NAV discounts can widen, amplifying losses. Leverage within portfolio companies adds risk. This guide is for informational purposes only and does not constitute financial advice. Past performance of private equity managers and listed vehicles is not a reliable guide to future results. Seek qualified professional advice before investing.

How Global Investments Can Help

Global Investments assists sophisticated investors in evaluating listed private equity as a component of their alternatives allocation. We can conduct comparative analysis of individual trusts — assessing NAV quality, discount history, manager track record, fee structure, and portfolio characteristics — and help you build a diversified listed PE portfolio appropriate for your return objectives and risk tolerance. For investors also seeking access to traditional (unlisted) PE fund structures, we can facilitate introductions to appropriate managers and feeder fund vehicles. Contact our alternatives investment team to explore private equity opportunities.