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The portfolio, valued at £612m at 30 April 2018, is well-diversified, with investments in over 500 companies.
Focus on mid-market companies
Our strategy is focused exclusively on the buyout segment of the private equity market, in which target companies are almost invariably established, profitable and cash generative. The portfolio is biased towards the mid-market (48%) and large deals (42%), which we view as more defensive, benefiting from experienced management teams and often leading market positions. In contrast, we view small companies as tending to be more vulnerable to economic cycles and we believe our focus on mid-market and larger deals offers the best balance of risk and reward.
Portfolio by investment type %
| Mid-market buyout companies | 48 |
| Large buyouts | 42 |
| Small buyouts | 8 |
| Other | 2 |
Exposure to US increasing
The portfolio is focused on developed private equity markets: primarily continental Europe (39%), the UK and the US, with almost no emerging markets exposure. In line with one of our strategic objectives, our weighting to the US increased to 23% from 14% at the time of the move to ICG in February 2016 while the UK bias has reduced to 35% from 45% over the same period. We expect both of these trends to gather pace as the benefits of being part of ICG’s global alternative asset manager platform are further realised. We have a three to five year target to increase the US focus to 30% – 40% of the Portfolio. The US is the largest and most developed private equity market in the world, and we believe will provide the Portfolio with attractive returns and further geographic diversification.
Portfolio by geography %
| Europe | 39 |
| UK | 35 |
| North America | 23 |
| ROW | 3 |
Sector bias towards growth sectors
The portfolio is weighted towards sectors that primarily have non-cyclical drivers, such as demographics, with 22% of the Portfolio invested in healthcare and education and 16% in business services. The remainder of the Portfolio is broadly spread across the industrial (17%), consumer goods and services (15%), leisure (12%) and TMT (10%) sectors.
Portfolio by sector %
| Heathcare and education | 22 |
| Industrials | 17 |
| Business services | 16 |
| Consumer goods and services | 15 |
| Leisure | 12 |
| TMT | 10 |
| Financials | 5 |
| Other | 3 |
Attractive and well-balanced vintage year exposure
The portfolio has an attractive maturity profile which balances near term realisation prospects with a strong pipeline of medium to longer term growth. Investments completed in 2014 or earlier, which are more likely to generate gains from realisations in the shorter term, represent 43% of the Portfolio. Against this, 57% of value is in investments made between 2015 and 2018, providing the Portfolio with medium to longer term growth as value created within these businesses translates into gains. Within the more mature holdings, relatively little value remains in companies acquired before 2008, with this category representing less than 4% of the portfolio.
A modest increase in valuation multiples over the year
(12 months to 31 January 2018)
Within the largest 30 companies, the valuation multiple has increased to 10.6x at 31 January 2018, up from 9.7x at the start of the year. This increase has been driven by a combination of a change in the mix and overall weightings of the largest underlying companies and a modest increase in aggregate multiples overall. Looking across the wider portfolio, the aggregate valuation multiples are in line with our largest 30 companies.
The net debt/EBITDA ratio of the largest 30 companies increased to 4.2x from 3.6x, a result of the change of mix and weightings of the underlying companies.