July 2021 Monthly

June, as promised at the Capital Markets day, has proved to be a busy month for investments with i) ICP Education, a leading independent group of UK nurseries, OCI’s indirect contribution via Fund IV £27m, ii) Afterbuy and DreamRobot, leading providers of e-commerce software in the German-speaking region, OCI’s indirect contribution via Origin Fund £6m, and iii) Primavera, the Portuguese leader in business management software, OCI's indirect contribution via Fund III £11m. The sale and follow-on investment in ACE Education was announced on 28 June. OCI's liquid resources available for future deployment are estimated to be £174m.

• New deals confirm sourcing advantage: Embedded in Oakley’s DNA is a growing, competitive advantage from its entrepreneur network, built up over 14 years. Oakley has supported their businesses in the past. These operating partners have invested €170m in Oakley Funds and helped Oakley find/manage acquisitions.
• Growth businesses: Oakley’s value creation (average EBITDA +20% in 2020) is achieved by i) being in growth sectors, ii) tech-enabled/digitised models (70%+), iii) transforming business models, iv) recurring revenue streams, and v) doing accretive M&A. These latest deals show these characteristics again.
• Valuation: Versus the end-Dec NAV, OCI trades at an 11% discount, despite its absolute (five-year CAGR total return of 16% to end-Dec) and relative (Oakley Fund III top 5% peer return) performance. Its above-peer discount is based off end-Dec NAV; peers use recent (higher) valuations. OCI yields 1.3%.
• Risks: While OCI’s costs are slightly above average, post-expense returns are still market-beating. Sentiment towards the global economic cycle is likely to be adverse, even though outperformance has been delivered in downturns. OCI’s portfolio is concentrated. Its permanent capital is right for private assets.
• Investment summary: OCI provides investors with liquid access to the attractive PE market, enhanced by Oakley’s incremental origination and management skills. Oakley Funds focus on mid-market, tech-enabled Western European companies that operate in the consumer, education and technology sectors. Accounting and governance appear conservative. There are risks – primarily sentiment-driven – around costs, cyclicality, and the liquidity and valuation of private assets. Buying an outperforming business at a discount is attractive, in our view, but we believe investors should focus on the long-term compounding NAV growth.