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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.

  • Secondary sale: On 2 April, ICGT sold eight mature primary fund investments, with net cash proceeds of £62m. The sale was at a discount of 5.5%, realised a return of 1.6x invested cost (15% IRR) and released undrawn commitments of £10m. The sale strengthened the balance sheet, at a discount one-eighth of ICGT’s.
  • Sale of Minimax: On 16 April, ICGT announced the realisation of Minimax (3.3% NAV), generating €53m (£45m) in ICGT cash proceeds. The sale was in line with the latest reported NAV (which reflected the expected sale), and proceeds have been received. ICGT originally invested in 2018 alongside ICG funds.
  • Valuation: ICGT’s NAV valuations are conservative (regular realisation uplifts). The ratings are undemanding, and the ongoing carry value against cost is modest. The 42% 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 3.0%.
  • 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 liquidity of the underlying assets. It seems anomalous, in our view, to have a consistent record of outperformance and to trade at a 42% discount to NAV.
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