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ICGT results to January 2022 reported a further strong year, with an NAV per share total return of 24.4%, its 13th consecutive year of double-digit NAV growth, and representing a five-year CAGR of 16.4% (post all fees), three times the FTSE All-Share Index total return. The portfolio generated a 29.4% return on a local-currency basis to January 2022. Total proceeds and new investments were a record £342.9m and £303.7m, respectively, generating net proceeds of £39.2m. Uplifts on exits continued, at 36%, in line with historical averages and showing a conservative NAV. New investment focused on high-return, High Conviction mandates (61%), including secondary investments.

  • Underlying company metrics: The largest companies delivered annual revenue growth of 27.1% and LTM EBITDA growth of 29.6%. The average EV/EBITDA of these companies was 14.6x (31 January 2021: 14.0x), with PEG halving. The net debt/EBITDA of the same companies was 4.3x (31 January 2021: 4.3x).
  • Defensive growth; long-term value: ICGT’s strategic approach has given investors market-beating returns and just two down quarters out of 24 since the manager was appointed. In good and bad years, the model has consistently delivered returns, driven by underlying company resilient growth.
  • Valuation: NAV valuations are conservative (uplifts on realisations averaging 35% long term). The ratings are undemanding, and the carry value against cost modest. The 33% discount to NAV is anomalous, we believe, with defensive market-beating returns, and is greater than the pre-COVID-19 levels. The yield is 2.0%.
  • 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 consistently generates superior returns, by adding value in an attractive market. ICGT’s focus on identifying companies with defensive characteristics means it is well-positioned to deliver resilient growth. It leverages ICG family synergies. Valuations/governance appear conservative. 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 33% discount to (January 2022) NAV.
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