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Advantages of listed private equity
Shareholders in listed private equity benefit from daily liquidity while participating in the potentially superior returns of a private equity portfolio. For the price of a share, shareholders gain exposure to a diversified private equity portfolio and can benefit from the expertise of the listed private equity manager in selecting investments. In addition, shareholders are not bound by the long-term obligation to fund an underlying managers’ investment programme, benefiting from the scale and experience the listed private equity manager has in administration and management of cash and undrawn commitments.
Listed private equity companies are “evergreen”, reinvesting proceeds from the sale of investments, free of capital gains tax, into new investments, compounding returns and providing the shareholder with long term capital appreciation. This, together with the long term horizon of private equity, means that listed private equity is best suited to long term holding, rather than frequent trading.
There is a deep and mature listed private equity sector available to investors. In Europe, there are 53 listed private equity companies, with an aggregate market capitalisation of
c. €69 billion, of which c. €24 billion are London-listed companies (source: LPX February 2018). The London Stock Exchange listed private equity sector is broadly split between highly diversified private equity fund of funds and specialist direct investors. In ICG Enterprise Trust’s case, we combine features of both the specialist direct investors and the diversified fund of funds, which we believe strikes the right balance between the two.
Finally, London listed investment trusts are supervised by boards of directors, who are typically all independent and who oversee the manager’s accountability to shareholders.