September 2021 Monthly

As expected, OCI’s 28 July trading statement was positive. The NAV grew from 403p at end-2020 to 445p at end-June 2021, a total NAV return of 11% on end- 2020 and 26% on 1H’20. OCI invested £95m – mainly through Fund IV (idealista, Dexters and ICP Education) and through the Origin Fund (ECOMMERCE ONE). Sale proceeds were £51m, cash was £172m (21% NAV), and outstanding commitments were £438m. Post 30 June, Fund III sold its ACE Education investment, and Origin reinvested in it. More details will be available with the interim results on 9 September.

• Portfolio company performance: 14 companies (52% of NAV) grew their revenues at or above expectations in the period. Four (14% of NAV) have seen a modest COVID-19 impact. Three (29% of NAV) continued to be significantly affected by ongoing, Europe-wide, COVID-19-related restrictions.
• Share buyback: On 29 July, OCI bought back 2m shares at 354p (i.e. well below 445p NAV and so enhancing to residual shareholders). As in 2020, OCI removed a potential overhang in a single trade. We expect buybacks to be used tactically when the discount is high. Peter Dubens is now the largest shareholder.
• Valuation: OCI trades at a 21% discount to NAV, despite its absolute (five-year CAGR total return of 16% to end-2020). The company is moving to quarterly reporting – so fair value changes are recognised more frequently, and investors can have a more regular view of value accretion. OCI yields 1.3%.
• Risks: While OCI’s costs are slightly above average, post-expense returns are still market-beating. Sentiment towards PE in downturns is likely to be adverse, even though outperformance has been delivered consistently. OCI’s portfolio is concentrated. Its permanent capital is right for private assets.
• Investment summary: OCI provides investors with liquid access to the attractive PE market, enhanced by Oakley’s origination and active management skills. Oakley funds focus on mid-market, tech-enabled Western European companies that operate in the consumer, education and technology sectors. Accounting and governance appear conservative. There are risks – primarily sentiment-driven – around costs, cyclicality, and the liquidity and valuation of private assets. Buying an outperforming business at a discount is attractive, in our view, but we believe investors should focus on the long-term compounding NAV growth.