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Broad-based growth across High Conviction Investments and Third Party Funds
The benefits of our approach to portfolio construction are demonstrated by our long-term track record. Over the last five years, our High Conviction Investments have generated an annualised Portfolio Return on a Local Currency Basis of 23.9% p.a. and our Third Party Fund investments have generated an annualised Portfolio Return on a Local Currency Basis of 17.8% p.a.
High Conviction Investments represented 48.9% of the Portfolio value at 31 January 2022 (31 January 2021: 50.7%). We anticipate that High Conviction Investments will continue to represent 50% - 60% of the Portfolio in the medium term.
During the year High Conviction Investments generated a 23.1% Portfolio Return on a Local Currency Basis. Key contributors to the performance included IRI (a provider of mission-critical data and predictive analytics to consumer goods manufacturers) and Visma (a provider of business management software and outsourcing services). The Secondary Investments made during the year have already shown positive returns, benefitting from the performance of a mature portfolio of invested assets.
Third Party Funds generated a 36.0% Portfolio Return on a Local Currency Basis for the year (FY21: 22.4%) and represented 51.1% of the Portfolio value at 31 January 2022 (31 January 2021: 49.3%). These returns were driven by the strong performance of a number of funds that we invest in, including those managed by Advent, Gridiron, CVC and Thomas H. Lee, as well as the realisation of U-POL.
ICG managed investments (27% of the Portfolio)
We invest in five of ICG’s 21 strategies. A key strategic advantage for ICG Enterprise is the proprietary access we have to deal flow from ICG, and the ICG portfolio is broadly split between funds and co-investments. Many of our investments include a mixture of subordinated debt and equity, targeting returns broadly in line with our usual equity investments, but the subordinated debt element significantly reduces the overall risk.
Third party co-investments (16% of the Portfolio)
These are investments directly into a company alongside a private equity fund. These opportunities enable us to proactively increase exposure to companies we have a high conviction will outperform through the cycle.
Secondary fund investments (18% of the Portfolio)
This is when we acquire an existing interest from a seller in a private equity fund that is already substantially invested. We favour funds that are at a stage when the underlying assets’ performance is visible.
All data at 31 January 2022 except where specified otherwise
1Annualised return for five year period ended at 31 January 2022