ICG Enterprise Trust

ICGT in personal pensions: do as the professionals do

14 Sep 2021 / Corporate research

With UK Pensions Awareness Day taking place on 15 September 2021, in this note, we explore the reasons why PE, and ICGT in particular, may be suitable for personal pensions. In summary, ICGT gives investors a liquid, managed option to replicate what professional pension fund managers and long-term investors do. It accesses above-market compounding returns, and diversifies risk. ICGT has strong corporate governance, good disclosure, and a simple structure. Its defensive growth strategy has consistently delivered superior returns across cycles. In our view, the discount to NAV (16%) offers additional value to compounding NAV growth.

  • PE matches assets to goals: Unless close to retirement, pension saving is to generate the maximum investment pot to then earn income over the long term. PE invests in assets for the long term, and has delivered compounding returns above markets, inflation and gilts. The assets match the goal in pension saving.
  • Why ICGT? Most PE investments are illiquid and available only to large investors. ICGT offers all investors liquid access to that asset class. Being listed, it has board supervision and regulated disclosure. Its access to ICG’s expertise generates unique opportunities. It has a proven defensive growth strategy.
  • Valuation: NAV valuations are conservative (uplifts on realisations averaging 35% long term). The ratings are undemanding, and the carry value against cost modest. The 16% discount to NAV is anomalous, we believe, with defensive market-beating returns, and is above the levels seen pre-COVID-19. The yield is 1.9%.
    Risks: PE is an above-average cost model, but post-expense returns are market-beating. Even though actual experience has been of continued NAV outperformance in economic downturns, sentiment is likely to be adverse. 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 defensive growth investment policy and exploiting synergies from being part of ICG since 2016. Valuations and governance appear conservative. It has an appropriate balance between risks and opportunities. The risks are primarily sentiment-driven on costs and cyclicality, and the underlying assets’ liquidity. As noted, it seems anomalous to have a consistent record of outperformance and to trade at a 16% discount to NAV.
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