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In our note, Unique approach to capital allocation, we examined how shareholders benefit from ICGT’s unique approach to capital allocation. In previous notes, we have highlighted how ICGT’s defensive growth strategy, in practice, differentiates itself from peers (see Appendix 1 of the note) and the capital allocation policy is also a differentiator. ICGT’s approach rewards investors with immediate income through a progressive dividend, long-term compounding capital growth through new PE investments, ongoing NAV accretion through a long-term buyback programme and further NAV accretion with an opportunistic buyback programme when the discount is high.

  • Shareholder returns: The FY’25 intention of a minimum 35p dividend has been reiterated (current yield 2.7%, five-year annual growth 9%+). 3Q new investment was £35m (further £23m to end-December). Buybacks of £50m (average discount 37.6%) have been executed since Oct’22 (+47p to the NAV).
  • 3Q results: NAV per share was 1,997p (31 July 2024: 1,946p), with NAV per share total return of 3.0% in 3Q (five-year annual 13.8%). The 12 full exits were at an average uplift to carrying value of 18%, yet again showing the conservatism in the accounting. The 3Q dividend was 8.5p.
  • Valuation: ICGT’s NAV valuations are conservative (regular realisation uplifts). The ratings are undemanding, and the ongoing carry value against cost is modest. The 34% discount to NAV is anomalous, we believe, with defensive, market-beating returns, and is above the levels seen pre COVID-19. The 2025E yield is 2.6%.
  • 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, in our view, to have a consistent record of outperformance and to trade at a 34% discount to NAV.
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