×

We outlined the key messages from the June 2024 CMD in our note, CM day 2024: defensive growth value creation. Namely, i) ICGT’s differentiated strategy with a dedicated investment team, ii) operating performance remains strong and capital structures are well positioned, iii) debt pricing is reducing and debt availability is accelerating, iv) access to the ICG platform brings substantial benefits, and v) the board has a focused and deliberate approach to long-term shareholder value. In our view, what defines ICGT’s uniqueness is its “defensive growth” approach and the ICG manager benefits. This has delivered five-year local currency portfolio returns of 17.1% CAGR, and 14.6% NAV p/sh. returns.

  • Value creation: ICGT adds value: i) an investment strategy delivering defensive growth through cycles (the key, in our view); ii) a managed cost base with a management fee rate cap, and ICG cost-sharing arrangement; iii) a balanced capital allocation; and iv) effective messaging/shareholder engagement.
  • Capital allocation: ICGT’s approach to shareholder distributions includes a progressive dividend policy (FY’21 24p, FY’22 27p, FY’23 30p, FY’24 33p), a long-term share buyback programme and opportunistic buybacks. In July alone, ICGT was in the market on eight days (see ICGT’s LSE website here).
  • Valuation: ICGT’s NAV valuations are conservative (realisation uplifts). The ratings are undemanding, and the ongoing carry value against cost is modest. The 32% discount to NAV is anomalous, we believe, with defensive, market-beating returns, and is above the levels seen pre COVID-19. The 2024E yield is 2.5%.
  • Risks: PE’s post-expense returns are consistently market-beating, but this is an above-average cost model. Even though actual experience has been of continued NAV outperformance in economic downturns, sentiment is likely to be adverse. We believe ICGT’s permanent capital structure is right for unquoted and illiquid assets.
  • Investment summary: ICGT has consistently generated superior returns, by adding value in an attractive market, having a strategic focus on defensive growth and exploiting ICG synergies. Valuations appear conservative, and governance is strong. ICGT focuses on delivering resilient, risk-adjusted returns. The risks are primarily sentiment-driven on costs and cyclicality, and on the underlying assets’ liquidity. It seems anomalous to have a consistent record of outperformance and to trade at a 32% discount to NAV.
Download the full report

Request a meeting

If you'd like to be introduced to the team at ICG Enterprise Trust, get in touch.

Request a meeting
Download the full report