Following a relatively upbeat final couple of months of 2023, sentiment has broadly continued to be positive in January. Rates appear to have peaked, and questions are very much focused on the timing and speed of any reductions.
What this means in practice remains slightly unclear. Will there be a lag effect for rate rises, with their impact more acutely felt in the broader economy this year? Will inflation remain more persistent, and therefore rates – while not rising – will not decline much? Or have central banks managed to engineer a soft landing?
One thing we do observe – and as we mentioned in our Q3 presentation – is the general commentary that 2024 could see an uptick in M&A activity (despite the well-known political uncertainty that is likely to be a persistent theme in 2024). Why does this matter? Historically, periods of higher transaction volumes have helped support valuations and generated growth in NAV. In our view there are a number of drivers behind this more optimistic tone, largely underpinned by the sense that we have reached peak rates; credit markets are easing, increasing the availability of financing for transactions; it is easier to price equity and underwrite new deals in an environment where cost of capital is more stable; and there is an element of pent up demand amongst GPs to return capital to LPs and to deploy new funds.
Alongside this, the supply/demand dynamics in the fundraising market still favour LPs (such as ICG Enterprise Trust).
Put all this together, and we as a team are looking ahead with cautious optimism to a potentially busier year ahead.
Talking of our Q3s, it was excellent to speak to a number of you in recent weeks. For the quarter we reported a cashflow positive portfolio that generated a 0.1% return on a local currency basis and a NAV per share total return of 3.3%, along with 12 Full Exits at an Uplift of 33.7% to their carrying value*. Our performance continues to add to our track record of generating defensive growth over the long-term, and we are proud that we are delivering for our shareholders. For those who missed it, the webcast recording is available here.
As we focus on navigating the investment landscape in 2024, we are also looking forward to continuing to broaden and deepen our shareholder engagement, supported by our partners Deutsche Numis, Cadarn and our recent hire into the sales and marketing team for ICG Enterprise Trust, Martin Li.
Thank you as always for your continued support – it has been eight years since Graphite Enterprise Trust joined ICG, and we look forward to many more years ahead.
Oliver & Colm
Past performance is not reliable indicator of future results.
*Unsure of some of these terms? See our Glossary.