November 2022 Monthly

The 3Q trading update reported i) NAV per share of 655p and NAV of £1,155m, ii) a total NAV return per share of +4% since 30 June 2022 (+25p) and +22% since 31 December 2021 (+119p), iii) £46m in investments in 3Q, and iv) ca.£153m share of cash proceeds expected post period-end, in addition to period-end cash of £49m and credit facilities of £100m, against five-year fund commitments of £979m, not all of which are likely to be drawn. In 3Q’22, 76% of the increase in the portfolio's value was driven by EBITDA growth and 24% by multiple expansion, largely as a result of recent transactions. The 25p total return includes 12p of valuation gains and 11p of foreign exchange movements, with share buybacks adding 2p.

• Portfolio company performance: OCI advised that, despite challenging markets, its “underlying portfolio of tech-enabled companies continued to deliver earnings growth, supported by long-term megatrends such as the shift to online for businesses and consumers, and global demand for quality education”.
• Investments: The £46m included the acquisition of vLex (cloud-based legal information platform), an additional investment in Grupo Primavera for its combination with Cegid (cloud-based management solutions) and investments for bolt-on acquisitions by portfolio companies, including TechInsights’ and Affinitas.
• Valuation: Against the end-June NAV, OCI trades at a 42% discount, despite its strong absolute, peer and market-beating relative performance. OCI has delivered consistently, with especially robust performance through COVID-19, demonstrating its downside resilience. OCI yields 1.2%.
• Risks: While OCI’s costs are slightly above-average, post-expense returns are still market-beating. Sentiment towards economic cycles may be adverse, even though downside protection has been proved repeatedly. OCI’s portfolio is concentrated, and we believe 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 active management skills. Oakley Funds focus on mid-market, tech-enabled European companies that operate in the technology, consumer and education sectors. Accounting and governance appear conservative. There are risks – primarily sentiment-driven – around costs and cyclicality, as well as the liquidity and valuation of the underlying private assets. There is potential upside from the one-off closing of the discount, but this may be considered against the compounding benefits from NAV growth.