Last close As at 06/08/2026
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Research: Investment Companies
abrdn Private Equity Opportunities Trust (APEO) posted a 12-month NAV total return (TR) to end-May 2023 of 7.0%, supported by continued strong portfolio earnings momentum (up 28.7% over the 12 months to end-March 2023 for APEO’s top 50 holdings). Muted global M&A volumes continue to weigh on private equity (PE) exit activity, with APEO’s capital calls in the calendar year to end-May 2023 (£74.0m) outpacing distributions (£54.1m). That said, APEO’s undrawn credit facility and cash of £243.4m at end-May 2023 provide it with decent near-term balance sheet headroom, as these cover 35% of APEO’s outstanding investment commitments (which should be drawn gradually in the coming years).
abrdn Private Equity Opportunities Trust |
Coping well with the tough environment |
Investment trusts |
3 July 2023 |
Analysts
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abrdn Private Equity Opportunities Trust (APEO) posted a 12-month NAV total return (TR) to end-May 2023 of 7.0%, supported by continued strong portfolio earnings momentum (up 28.7% over the 12 months to end-March 2023 for APEO’s top 50 holdings). Muted global M&A volumes continue to weigh on private equity (PE) exit activity, with APEO’s capital calls in the calendar year to end-May 2023 (£74.0m) outpacing distributions (£54.1m). That said, APEO’s undrawn credit facility and cash of £243.4m at end-May 2023 provide it with decent near-term balance sheet headroom, as these cover 35% of APEO’s outstanding investment commitments (which should be drawn gradually in the coming years).
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APEO’s NAV total return has been ahead of public markets in the long term |
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Source: Refinitiv, company data, Edison Investment Research. Note: Annualised total returns in sterling. |
Mid-market private equity remains attractive
While interest rate normalisation may somewhat dilute gross internal rates of return (IRRs) across the PE sector, we note that the industry has moved away from pure financial engineering towards a greater emphasis on driving operational change (based on in-house value creation teams) and value-accretive, bolt-on M&A activity. In particular, the PE mid-market (which APEO focuses on) offers several advantages: (1) many of the acquired companies have not been owned by PE before and are low-hanging fruit in terms of value creation, (2) portfolio exits are less dependent on the IPO market (with more trade sale and sponsor-to-sponsor opportunities), and (3) deals are less reliant on funding via syndicated loans (which has been muted recently) and also often involve less leverage versus large/mega buyouts.
High-conviction strategy still proving successful
APEO offers a quality exposure to the PE mid-market through a portfolio of investments managed by carefully selected, top-tier European general partners (GPs) with solid sector expertise (the 12 'core’ GPs make up 57% of APEO’s NAV). This high-conviction strategy has proved successful over the mid- to long-term with APEO’s five-year and 10-year NAV TR to end-May 2023 at 17% and 15% pa, respectively, ahead of the MSCI Europe Small Cap Index TR of 2.5% and 9.5%, respectively, and broadly in line with its close PE peers. Moreover, its combined 52% exposure to less cyclical sectors such as technology (typically profitable B2B software), healthcare and consumer staples, together with the wide c 39% discount to NAV, may offer some downside protection in the current environment.
Portfolio earnings momentum supports returns
APEO’s net asset value (NAV) TR of 7% to end-May 2023 (based on end-March 2023 valuations for c 90% of the portfolio excluding new investments) was assisted by continued good revenue and EBITDA momentum across APEO’s top 50 holdings (41.1% of portfolio NAV) with last 12-month (LTM) growth to end-March 2023 at 23.6% and 29.7%, respectively. This follows similarly robust 17.8% and 25.7% LTM revenue and EBITDA growth to end-March 2022, respectively. We believe this is underpinned by a resilient sector mix, including in particular technology (20% at end-March 2023, mostly B2B software businesses), healthcare (19%) and consumer staples (13%). That said, we note that APEO’s manager still expects a macro-driven slowdown in the second half of 2023.
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Exhibit 1: APEO’s sector exposure over time |
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Source: abrdn Private Equity Opportunities Trust data. Note: Consumer exposure at end-March 2023 consists of consumer staples (13%) and consumer discretionary (14%). Financial year ending 30 September. |
We believe that good earnings momentum has allowed APEO to offset the somewhat softer peer multiples, with the average LTM EV/EBITDA for the top 50 holdings at 14.5x at end-March 2023, down c 10% from 16.1x at end-March 2022 (even though these multiples are not fully comparable given the different composition of the top 50 bucket). It is worth noting that the average valuation multiple for the top 50 holdings was broadly stable versus end-September 2022. In terms of leverage across underlying portfolio companies, the median leverage multiple (defined as net debt to LTM EBITDA) across APEO’s top 50 underlying companies stood at 4.2x at end-March 2023 (slightly down from 4.3x at end-September 2022). APEO’s manager, Alan Gauld, highlighted that most of the debt across the underlying companies is floating rate and unhedged.
APEO’s manager highlighted that he is particularly pleased with the performance of its co-investment portfolio, which saw a 13% average valuation uplift in H123 (to end-March 2023). APEO’s co-investment portfolio now consists of 25 holdings, representing c 22% of APEO’s portfolio value at end-March 2023, up from 16% at end-March 2022 and 12% at end-March 2021. APEO’s 12-month performance and its longer-term returns are broadly in line with the average of peers, which have a significant share of primary fund investments (see Exhibit 2).
Exhibit 2: Selected peer group at 30 June 2023*
% unless stated |
Market cap £m |
NAV TR |
NAV TR |
NAV TR |
NAV TR |
Ongoing charges ratio (%)** |
Perf |
Discount |
Net |
Dividend |
Abrdn Private Equity Opp Trust |
699 |
7.0 |
88.1 |
119.4 |
292.6 |
1.1 |
No |
(39.4) |
104.6 |
3.3 |
CT Private Equity Trust |
345 |
14.1 |
91.9 |
140.4 |
290.5 |
1.2 |
Yes |
(32.7) |
102.6 |
5.4 |
HarbourVest Global Private Equity |
1,724 |
3.3 |
88.0 |
137.9 |
368.6 |
1.2 |
No*** |
(42.2) |
100.0 |
0.0 |
ICG Enterprise Trust |
757 |
8.2 |
79.4 |
111.6 |
258.6 |
1.5 |
Yes |
(40.5) |
106.1 |
3.5 |
Pantheon International |
1,351 |
1.2 |
65.9 |
100.1 |
255.8 |
1.2 |
Yes |
(43.7) |
100.0 |
0.0 |
Simple average |
1,044 |
6.7 |
81.3 |
122.5 |
293.4 |
1.3 |
- |
(39.8) |
102.2 |
2.2 |
APEO rank in peer group |
4 |
3 |
2 |
3 |
3 |
5 |
- |
2 |
2 |
3 |
Source: Morningstar, Edison Investment Research. Note: Net gearing is total assets less cash and equivalents as a percentage of net assets. *NAV performance in sterling terms based on end-May 2023 NAV, or latest earlier available NAV (end-April 2023 for ICG Enterprise Trust and Pantheon International, end-March 2022 for CT Private Equity Trust). **Excluding other expenses charged by the underlying investments held in the portfolio. ***No performance fee is charged at the HVPE level, but it is charged on the HarbourVest secondary and direct funds.
Exhibit 3: APEO’s discrete performance versus selected indices in total return, sterling terms (%)
12 months ending |
APEO’s NAV |
APEO’s share price |
MSCI Europe Small Cap index |
LPX Europe NAV Index |
UK All-share Index |
31/05/19 |
14.1 |
11.4 |
(7.0) |
11.1 |
(3.2) |
31/05/20 |
2.2 |
(11.8) |
(0.6) |
4.4 |
(11.2) |
31/05/21 |
36.4 |
58.5 |
39.9 |
14.0 |
23.1 |
31/05/22 |
28.9 |
10.8 |
(7.8) |
23.9 |
8.3 |
31/05/23 |
7.0 |
(7.6) |
(5.0) |
1.8 |
0.4 |
Source: Refinitiv, LPX Group, Edison Investment Research
A solid 2.6x MOIC and 15% average uplift on H123 exits
As PE investment companies tend to realise their investments at an uplift to previous carrying value, the recent slowdown in global M&A activity (and in turn PE exit volumes) has limited APEO’s return in recent months. That said, APEO still recorded a healthy 2.6x multiple on invested capital (MOIC) on its £83.6m realisations in the six months to end-March 2023 (vs a 2.2x MOIC on £120.6m distributions in H122). These were completed at a 15.1% average uplift to the carrying value two quarters prior, suggesting a continued conservative approach to portfolio valuations (even if the uplift was somewhat below the 25% historical average through the cycle). APEO’s manager expects future realisations to be executed at an uplift to carrying value as well, though probably at a level closer to what APEO delivered in H123.
Importantly, a significant part of the exit proceeds in H123 was generated from a trade sale to a strategic investor (eg Excelia, RL360, Linxis Group, Benvic, The Binding Site), as sponsor-to-sponsor activity abated amid lower debt availability (though two major realisations – Access and TMF Group – were refinancings) and sales of listed holdings following their IPOs was also limited.
Near-term balance sheet headroom still good
Recent low levels of global M&A activity have resulted in APEO’s capital calls in the calendar year to end-May 2023 (£74.0m) outpacing distributions (£54.1m), see Exhibit 4. We note that some of these drawdowns come from APEO’s co-investments (£20.6m out of £104.4m in H123 to end-March 2023), which are fully under its investment manager’s control. APEO’s usual ticket size per co-investment is c £5–12m.
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Exhibit 4: APEO’s drawdowns and distributions |
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Source: abrdn Private Equity Opportunities Trust data, Edison Investment Research |
Upsized credit facility provides more flexibility
In response to initial signs of weakness in the PE exit environment, APEO upsized its credit facility in October 2022 to £300m from £200m previously (the credit facility matures in December 2025). APEO’s liquidity was recently also assisted by a partial realisation of its co-investment in non-food discount retailer Action (£26m proceeds collected in April and May 2023), though the manager underlined that the transaction was executed not to boost liquidity at the holding level but primarily for portfolio rebalancing purposes (Action is still the largest single underlying investment, making up 4.2% of APEO’s NAV after the transaction).
APEO’s undrawn credit facility (£221.6m at end-May 2023) together with its cash balance (£21.8m) cover 35% of APEO’s total outstanding commitments of £697.2m at end-May 2023, see Exhibit 5 (the manager considers £83.3m of the commitments as unlikely to be drawn). This compares with APEO’s average FY13–22 commitment coverage ratio of c 50%. Given the long capital deployment cycle (these commitments are normally drawn over three to five years), it is a common practice of listed PE companies with a significant share of primary fund investments like APEO to commit more capital than is available for deployment at a given time to facilitate a full investment level.
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Exhibit 5: APEO’s coverage ratio |
Exhibit 6: APEO’s overcommitment ratio |
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Source: abrdn Private Equity Opportunities Trust data, Edison Investment Research |
Source: abrdn Private Equity Opportunities Trust data, Edison Investment Research |
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Exhibit 5: APEO’s coverage ratio |
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Source: abrdn Private Equity Opportunities Trust data, Edison Investment Research |
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Exhibit 6: APEO’s overcommitment ratio |
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Source: abrdn Private Equity Opportunities Trust data, Edison Investment Research |
At the same time, we note that underlying fund credit facilities attributable to APEO at end-March 2023 stood at £92.9m (vs £113.3m at end-September 2022 and £91.9m at end-March 2022). The investment manager expects these to be largely drawn over the subsequent six to twelve months. He also highlighted during the interim analyst call that the current balance is estimated to be closer to £70–75m, which is roughly equal to APEO’s drawdowns in the calendar year to end-May 2023 and is well covered by APEO’s available total resources. The company’s overcommitment ratio (defined as outstanding commitments to NAV) stood at 37.6% at end-May 2023, at the lower end of APEO’s target range (30–75%). Therefore, we believe that APEO has decent near-term balance sheet headroom at present, which will be critical in a scenario of continued net positive capital calls (which is what the manager expects for the second half of 2023). APEO can seek to generate further liquidity (if needed) from disposals of its limited partner positions in the secondary market. APEO’s manager said that high-quality buyout secondaries are currently priced at a moderate c 10% discount to NAV and he could potentially look at opportunistic sales if secondary pricing tightens further.
APEO maintains dividend policy and pursues new investments
The board’s confidence in APEO’s liquidity is illustrated by the continued progressive dividend per share, with the first quarterly payment at 4.0p and another 4.0p payment declared and to be paid on 28 July 2023. This represents a c 11% increase from the 3.6p quarterly payments in the previous year. On an annualised basis, the recent payments represent a dividend yield of c 3.5%. We also note that APEO’s manager continued to make new investments in H123 to end-March 2023, including into five primary commitments (£121.8m), two co-investments (£9.3m), two follow-ons into existing co-investments (£5.6m) and one secondary investment (£4.6m). Post balance sheet date, APEO deployed a further £50m into three new primary commitments.
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Research: TMT
For Q123, Nano Dimension reported good progress in revenue, up 43.5% y o-y and 23.6% q-o-q to $15.0m. Continued investment in R&D resulted in an adjusted EBITDA loss of $23.7m. Revaluation of the company’s stake in Stratasys and interest income earned on cash resulted in net income of $22.2m for the quarter. With net cash of $974m at quarter end, the company is well-funded to pursue its acquisition strategy.