Apax Global Alpha Q1 Results: An unwelcome write-down mutes returns in Q1, but wider performance still strong

Apax Global Alpha (AGA), the private equity focused investment trust, reported first quarter results this morning.

- NAV down 4.4% vs Q4 2023.

- Including dividends paid over the quarter, overall NAV total return in the three months was -0.5%.

- AGA saw trading deteriorate at its Vyaire ventilator business during the quarter, writing down the value of its holding in the company by EUR24 million. The write down was responsible for 85% of the losses on investments over the period.

- Debt portfolio (21% of NAV) continues to perform well, up 3.5% over the quarter.

- The slowdown at Vyaire resulted in underlying portfolio revenue growth slowing slightly to 10% over the last 12 months, although profits continued to grow at 18% per annum.

- Discount to NAV: 33.9%.

- The shares were broadly flat in early trading.

Nicholas Hyett, Investment Manager at Wealth Club commented;

"The weakness in Vyaire is unwelcome at a time when the trust could have done with a bit of breathing room. It will do little to close the trust's sizeable discount in the short-term.

However, looking beyond the short-term pain there are plenty of promising signs. Earnings growth in the trust's underlying companies remains very healthy, at 18% year-on-year, driven by the more mature assets that account from over half the portfolio. The trust has also invested around EUR85 million in new investments - including some "transformational add-on acquisitions" for existing holdings.

The debt portfolio also remains a point of differentiation and strength - with a yield to maturity of 12.9%, it should help underpin the dividend during the lull in private equity transactions.

The trust's sizeable discount means the dividend yield is currently around 8% - investors are being paid to wait as the PE market digests higher interest rates and the portfolio continues to mature. We see a pickup in sales within the private equity portfolio as a key catalyst for closing the trust's unusually large discount to NAV."

*Apax Global Alpha is held within the Wealth Club Managed Portfolios. The author, Nicholas Hyett holds shares in Apax Global Alpha directly.

Wealth Club view on investment trusts

"At Wealth Club, we think investment trusts can significantly improve an investor's portfolio.

They give you access to illiquid asset classes like private equity and infrastructure that are otherwise off limits to all but the very wealthiest individuals. These sectors often perform very differently to more mainstream markets and over the long term we believe they can improve your investment returns.

Investment trusts are also ideal for mangers investing in more illiquid parts of mainstream markets - such as smaller companies, emerging markets or out of favour companies. Because investment trusts have permanent capital, investors can't withdraw their money at times of stress and the manager can focus on the long term.

It's permanent capital that allows investment trusts to leverage their investments as well. By borrowing money to invest, trusts are able to magnify their performance - albeit at potentially higher risk, making gearing something to monitor closely.

Of course, the investment trust structure, which is essentially a stock market listed company which exists only to invest on its shareholders behalf, does come with some downsides. In particular investment trusts often trade at a discount to the value of their underlying investments. This means that they can be more volatile, falling by more than the value of their underlying investments at times of market stress and potentially overshooting the value of their investments during times of exuberance.

Ultimately investment trusts are all about patience. For those able and willing to sit out a short-term rollercoaster, the long-term benefits can be considerable.

The Wealth Club Portfolio Service typically invests between 10-15% in investment trusts."

Ends

For further information contact:

Jo Thorne: 07939882816, [e-mail]

About Wealth Club

The aim of Wealth Club is simple. To provide high-net-worth individuals and sophisticated investors with clear, impartial and well-researched information on investment opportunities not typically available through mainstream stockbrokers or financial advisers. Wealth Club was set up in February 2016 and is now the largest non-advisory broker of tax-efficient investments such as VCTs, EIS and Inheritance Tax Portfolios. Since launch 12,000 clients have invested more than £1.2 billion through its platform. We actively target commercially compelling, high-potential and high-growth companies to back. In 2023, over 40% of Wealth Club's direct investments in private companies were oversubscribed.

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