Private equity investment trusts have started the year slowly, with just 2% of fund assets realised in the first quarter, according to analysts at Stifel.
That is well below the typical 20 to 25% realisation rate seen in healthier markets and reflects the subdued deal environment that defined 2023 and 2024.
Why realisations matter for performance
Realisations generate the cash that powers private equity trusts. That money is used to reinvest, pay dividends or fund share buybacks. Without regular exits, funds struggle to refresh their portfolios or return value to shareholders.
Market volatility stalls deal pipeline
Stifel points to a bout of volatility in April, the so-called tariff tantrum, which caused several private equity deals and IPOs to be postponed. While markets have since stabilised, the long lead times in private markets mean activity is unlikely to recover before the second half of the year.
New investments slow to a trickle
New deal activity has also pulled back. NB Private Equity made no fresh investments in the quarter. HgCapital was the exception, with £232 million deployed and £102 million expected from disposals. Most funds are staying cautious, which means portfolios look increasingly static.
NAVs holding up, but discounts remain wide
Stifel expects net asset values to be flat over the first half of 2025. But that is not being reflected in share prices. Many trusts trade at discounts of 30 to 40% to NAV, and in some cases, those discounts widened further in April. The lack of exits remains the key concern.
Selected trusts still offer long-term value
Stifel retains buy ratings on ICG Enterprise Trust (LSE:ICGT), NB Private Equity, Pantheon and Partners Group Private Equity. Each has introduced clearer capital return policies, particularly share buybacks, which could help close the gap between NAV and share price once exit activity resumes.
What could unlock the sector
Most trust portfolios are now ageing. Many of the holdings date from 2020 or earlier, meaning they are approaching the typical maturity window for a profitable sale. If market conditions hold steady, the second half of the year could see a return to more active realisations.
Until then, this is a waiting game. The core model remains intact: buy and build good companies in private hands, then realise value through a sale. But without exits, the share price discounts will persist. Investors looking at the sector today will need to be patient and focused on long-term recovery.