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Upcoming event | Hardman Talks: Volta Finance ‘Seizing opportunities in volatile times’

In our note, FY’21 results: blew the roof off, not just the doors, published on 20 May 2021, we noted the 4Q 11.8% NAV total return (22.5% in the year, vs. the 15.9% five-year average). Portfolio returns (local currency) were 24.9%, with the “High Conviction” (HC) portfolio generating 48.0% and third-party funds 22.4%. Underlying investee company revenue growth was 15%. Realisations continued (at a 31% average uplift to carrying value), and investments were paced to current and prospective opportunities. FY’22 has started well (£97m proceeds in two months, vs. £147m p.a. annual five-year average). ICGT’s “defensive growth” strategy delivered on its promises in FY’21.

  • How these returns were delivered: Our September 2020 report, Defensive growth: explaining downside resilience, noted why PE outperforms in downturns. ICGT further reduces risk with a “defensive growth” strategy. 4QFY’21 saw a strong performance in two of its largest listed holdings, PetSmart and Telos.
  • Insider buying in market post results: We note that there have been multiple insiders buying shares since the results, including Jane Tufnell (2x 10,000 shares, taking her stake to 30,000), Alastair Bruce (+6,000, to 25,000) and Oliver Gardey, Head of Private Equity Fund Investments at ICG (+4,500, to 26,932).
  • Valuation: Valuations are conservative (medium-term uplifts on realisations averaging 30%+ to the latest book value). Ratings are undemanding, and the carry value against cost is modest. This gives confidence that the accounting date NAV is realistic. The 23% discount to NAV is above pre-COVID-19 historical levels.
  • 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, with a defensive growth investment policy, and exploiting synergies from being part of the ICG family. The valuations and governance appear conservative. It has an appropriate balance between risks and opportunities. Risks are primarily sentiment-driven on costs and cyclicality, as well as the underlying assets’ liquidity. It seems anomalous that a business with a consistent record of outperformance is trading at a 23% discount to NAV.
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