Deutsche Numis outlined a positive outlook for investment trusts in the private equity sub-sector, driven by a continuation of strong NAV return track records and the potential for narrowing of discounts.
Discounts on many PE trusts are "excessively wide and the outlook for share price returns is attractive", the broker said it believes.
In a note to clients, analysts Gavin Trodd and Ewan Lovett-Turner emphasized the role of active management in delivering operational improvements and adapting to a changing environment.
A more stable, or declining, interest rate environment would also be supportive, they added.
Near-term catalysts for improved sentiment include an expected increase in realisation activity, which is expected to reassure investors on valuations and provide liquidity for capital returns.
The Numis analysts also highlighted that changes in cost disclosures will be "beneficial, putting the sector back on the radar of private wealth managers," despite some limitations on retail investment platform access.
Several key investment opportunities were highlighted, with the analysts saying their "unapologetically long" list of recommendations was a reflection of their positive view of the sector "and that LPE is often accessed through a 'basket' of funds".
These included HgCapital Trust (LSE:HGT), described as a manager with "an exceptional record through investing in a high-quality portfolio of SaaS businesses with recurring revenues."
Oakley Capital Investments (AIM:OCI) was highlighted for its "wide discount on a portfolio of founder-led companies, acquired at attractive prices, in consumer, technology, education and business services."
Pantheon International PLC (LSE:PIN), commended as "a great way to gain widely diversified exposure to private equity markets," with a board focused on delivering for shareholders.
HarbourVest Global Private Equity (LSE:HVPE) was flagged as "too cheap for a diversified portfolio of PE interests."
ICG Enterprise Trust (LSE:ICGT) was praised for its "defensive growth approach" and liquidity-enhancing buybacks and Chrysalis Investments Ltd (LSE:CHRY) also as the potential IPO of Klarna is seen as a likely "key" driver for future performance.
Seraphim Space Investment Trust PLC (LSE:SSIT), one of the best performers last year, was identified as having "potential to deliver strong returns as the portfolio matures", while the space-tech market sees growing demand from significant market players, such as BlackRock and Airbus, and a wide variety of areas such as cybersecurity, defence and climate change.