HgCapital’s quoted vehicle slashes assets 29%(3)

The firm’s London-listed trust recorded a strong cash position despite the unrealised write-downs and is planning to ‘bide [its] time' in 2009. HgCapital CIO Frances Jacob noted the listed trust does not have the same sort of over-allocation strategy that has recently caused problems for other listed vehicles including fund of funds linked to Candover and SVG.

The HgCapital Trust, the listed affiliate of private equity firm HgCapital, revealed a write-downs of 29 percent on its assets for the financial year ending 31 December 2008.

It also reported a 12% fall in share price, which compares to an overall 30 percent decline in the FTSE All Share Index.

It achieved resilient profits of £92 million down 12 percent compared with £106 million in 2007. This was primarily as a result of nine exits made during the 12 month period- including Sanctuary Spa and Clarion Events-, which helped to offset a 2 percent decline in net asset value, leaving the trust with a 0.5 percent NAV increase. The firm’s net asset value per share was 929 pence at the end of last year compared with 948 pence per share in 2007.

The trust said its cash position remains good, with 55 percent, or £130 million, of its net assets still waiting for deployment in HgCapital’s fifth and sixth funds. It plans to use this capital to support its portfolio companies and acquire add on acquisitions.

Other listed funds have not been so fortunate. Last week UK buyout group Candover entered talks with “selected parties” on a potential takeover of Candover Investments, its listed fund of funds vehicle, after slashing the value of the listed fund's portfolio by about 50 percent and suspending investment activity from its most recent buyout fund. Earlier this month SVG Capital, the London-listed investor in Permira’s funds, wrote down to zero its stakes in three Permira portfolio companies.

“We do not have the same over-allocation [strategy] that caused Candover and SVG such problems,” Frances Jacob, HgCapital chief investment officer, said in an interview.

Jacob said the listed trust was planning to “bide [its] time” and is unlikely to make any new investments other than add-ons and refinancing in 2009, but will start looking for new deals from 2010 onwards.

The results also revealed that HgCapital has agreed a further reduction on its management fees for the trust. It reduced them to 1.75 percent earlier this year but the annual results reveal that the charges will be reduced down to 1.5 percent after the investment period for HgCapital VI is up.

This afternoon the firm's shares were trading at 665 pence each.