Standard Life European Private Equity — Moving to quarterly dividends with improved yield

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Standard Life European Private Equity — Moving to quarterly dividends with improved yield

Standard Life Private Equity Trust (SLPET) takes a long-term, conviction approach to fund selection, evidenced by its new primary commitments in FY17 being made to private equity managers where there was a strong existing relationship. NAV total returns have been ahead of peers over three and five years, and share price returns have noticeably outpaced NAV returns over one year. The share price discount to NAV has narrowed markedly from c 36% in early 2016 to c 14% currently, arguably due in part to the strength of SLPET’s underlying performance, as well as its revised dividend policy, with improved and more frequent payouts scheduled. The manager sees portfolio companies’ earnings growth continuing to drive value creation, with the maturity profile of SLPET’s portfolio suggesting further near-term upside potential from prospective realisations.

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Investment Companies

Standard Life Private Equity Trust

Moving to quarterly dividends with improved yield

Investment trusts

7 February 2018

Price

335.0p

Market cap

£515m

AUM

£589m

NAV*

390.5p

Discount to NAV

14.2%

*Estimated NAV as at 31 December 2017.

FY18 prospective yield

3.7%

Ordinary shares in issue

153.7m

Code

SLPE

Primary exchange

LSE

AIC sector

Private Equity

Benchmark

None

Share price/discount performance

Three-year performance vs index

52-week high/low

353.0p

290.5p

400.7p

343.8p

**Including income.

Gearing

Gross*

0.0%

Net cash*

18.0%

*As at 31 December 2017.

Analysts

Gavin Wood

+44 (0)20 3681 2503

Sarah Godfrey

+44 (0)20 3681 2519

Standard Life Private Equity Trust is a research client of Edison Investment Research Limited

Standard Life Private Equity Trust (SLPET) takes a long-term, conviction approach to fund selection, evidenced by its new primary commitments in FY17 being made to private equity managers where there was a strong existing relationship. NAV total returns have been ahead of peers over three and five years, and share price returns have noticeably outpaced NAV returns over one year. The share price discount to NAV has narrowed markedly from c 36% in early 2016 to c 14% currently, arguably due in part to the strength of SLPET’s underlying performance, as well as its revised dividend policy, with improved and more frequent payouts scheduled. The manager sees portfolio companies’ earnings growth continuing to drive value creation, with the maturity profile of SLPET’s portfolio suggesting further near-term upside potential from prospective realisations.

12 months ending

Share price
(%)

NAV
(%)

LPX Europe
(%)

LPX Europe NAV (%)

MSCI Europe
(%)

FTSE All-Share (%)

31/12/13

23.2

11.5

33.9

12.9

23.5

20.8

31/12/14

10.0

8.8

4.5

4.9

0.2

1.2

31/12/15

1.1

11.3

14.9

5.2

3.3

1.0

31/12/16

43.0

26.0

27.7

24.6

19.6

16.8

31/12/17*

21.2

10.8

23.7

17.8

15.4

13.1

Source: Thomson Datastream, Bloomberg. Note: 12-month discrete £-adjusted total return performance up to last quarter-end. *Based on estimated NAV at 31 December 2017.

Investment strategy: Systematic, disciplined approach

SLPET aims to achieve long-term total returns through investing in a portfolio of 35-40 funds run by experienced private equity managers with strong track records of generating attractive investment returns, giving exposure to an underlying portfolio of c 350 private companies. Funds are selected that invest in mature businesses, primarily via buyout transactions. A systematic, disciplined approach is followed, involving detailed and rigorous screening and due diligence to identify and evaluate primary fund offerings as well as secondary market transactions, which are used to adjust portfolio exposures and to maintain SLPET’s capital efficiency.

Outlook: Robust transaction activity expected

The manager expects new investment and realisation activity to remain robust over the next year, with the large number of private companies in Europe and North America providing significant opportunities. SLPET’s portfolio is focused on private equity managers that historically have been able to generate value through operational improvements and strategic repositioning, and these factors are expected to underpin value creation going forward. SLPET has a relatively mature portfolio, which is viewed as providing additional potential for near-term value creation, with c 25% average uplifts to valuations historically achieved on exit.

Valuation: Narrowed discount; above-average yield

SLPET’s share price discount to NAV has narrowed markedly from its five-year high of 36.3% in March 2016 to its current level of 14.2%, which is towards the lower end of the peer group range. The total dividend was more than doubled to 12.0p for FY17 and the board intends to pay four quarterly dividends of 3.1p for FY18.

Exhibit 1: Trust at a glance

Investment objective and fund background

Recent developments

SLPET’s objective is to achieve long-term total returns through investing in a diversified portfolio of leading private equity buyout funds, a majority of which have a European focus, with exposure managed through the primary and secondary funds markets. Since January 2017, there have been no size and geographic restrictions applying to fund selection. There is currently no available benchmark that the board deems an appropriate measure of SLPET’s investment performance.

11 December 2017: Confirmation of intended move to quarterly dividends, with four quarterly payments of 3.1p planned for FY18.

4 December 2017: Full-year results to 30 September 2017 – NAV total return +14.9%; 6.0p final dividend recommended.

30 November 2017: Calum Thomson appointed as a director, ahead of Alastair Barbour stepping down from the board on 29 December 2017.

14 November 2017: 31 October 2017 estimated NAV per share 380.7p.

20 September 2017: Qtrly update to 30 June 2017: NAV per share +5.9% to 390.6p.

Forthcoming

Capital structure

Fund details

AGM

25 January 2018

Ongoing charges

1.14% (FY17 direct fees)

Group

SL Capital Partners

Interim results

June 2018

Net cash

18.0%

Manager

Team managed

Year end

30 September

Annual mgmt fee

0.95% of net assets

Address

1 George Street,

Edinburgh EH2 2LL

Dividend paid

Apr, Jul, Oct, Jan

Performance fee

None

Launch date

29 May 2001

Trust life

Indefinite

Phone

0131 245 0055

Continuation vote

N/A

Loan facilities

£80m revolving credit facility

Website

www.slpet.co.uk

Dividend policy and history (financial years)

Share buyback policy and history (financial years)

Since FY15, interim and final dividends have been paid. The board’s intention is to maintain the real value of the 12.0p FY17 annual dividend in future years, with four quarterly dividends of 3.1p planned for FY18.

The board views buybacks as part of its strategy in relation to capital efficiency. SLPET has authority to repurchase 14.99% and allot 5.0% of issued share capital. No shares have been repurchased since August 2016.

Shareholder base (as at 15 January 2018)

Portfolio exposure by fund type (as at 30 September 2017)

Top 10 underlying holdings (as at 30 September 2017)

Year of

investment

% of net assets

Company

Business

Fund

30 Sept 2017

30 Sept 2016

Action

Non-food discount retailer

3i Eurofund V

2011

7.1

6.1

Scandlines

Northern European ferry operator

3i Eurofund V

2007/2010/2013

2.3

1.7

Bambora

Physical, e-commerce & mobile payment services

Nordic Capital VIII

2014

1.2

N/A

Lindorff

European credit management services

Nordic Capital VIII

2014

1.1

1.3

Schenck Process

Industrial weighing, feeding, screening systems

Industri Kapital 2007

2007

1.1

1.2

ista

Energy management services

CVC Euro Equity V

2013

1.0

N/A

Handicare

Technical aids for the elderly and physically disabled

Nordic Capital VII

2010

1.0

N/A

Vistage

Subscription-based leadership development services

Tower Brook III

2012

1.0

0.8

CPA Global

IP software & services for corporates and law firms

Fourth Cinven

2012

0.9

N/A

Element

Materials testing

Bridgepoint Europe V

2016

0.9

N/A

Top 10

17.6

16.2

Source: SLPET, Edison Investment Research, Bloomberg, Morningstar. Note: *N/A where not in September 2016 top 30.

Fund profile: Selective Europe-focused fund of funds

Launched in May 2001, SLPET is an LSE-listed investment trust which aims to achieve long-term total returns through investing in a diversified portfolio of private equity buyout funds, a majority of which have a European focus. To give investment flexibility, SLPET’s investment policy was revised in January 2017, removing restrictions over the target enterprise value range of the funds selected for investment and the limit on portfolio investments outside Europe.

SLPET’s investment manager, SL Capital Partners, adopts an investment approach that comprises rigorous screening and thorough due diligence to identify and evaluate suitable private equity fund investments. The manager’s view is that access to leading private equity managers and appropriate fund selection are essential to achieving the best possible investment performance, given that historical returns across the private equity fund universe have varied widely. The aim is for SLPET’s portfolio to comprise around 35 to 40 active fund investments at any one time, with individual fund and manager exposure limits set at 12.5% and 20.0% of NAV to ensure sufficient diversification.

Part of Aberdeen Standard Investments, the manager is one of the largest private equity fund investors in Europe, with a deeply resourced and experienced investment team. The manager believes that its scale and the team’s experience enable it to identify and invest in Europe’s top-tier private equity funds, which may be less accessible to the wider market.

The fund manager: SL Capital Partners

The manager’s view: Maintaining capital discipline

The manager reports that the fund-raising environment in Europe and North America for leading private equity managers remains strong, with 2017 likely to have been another record year for global private equity fund-raising. Against this backdrop and with high levels of competition for quality companies, average purchase price multiples have continued to rise. However, the manager highlights that, despite debt markets being supportive of private equity transactions, funding structures remain relatively conservative with equity tending to represent 45-50% of average purchase prices.

The investment team has seen a steady pace of transaction activity in recent years and expects new investment and realisation activity to remain robust over the next year, with the large number of privately owned small- and medium-sized businesses in Europe and North America providing significant opportunities for private equity managers. In the 12 months ending September 2017, fund drawdowns rose from £66.2m in the prior year to £94.0m, but the manager notes that these were more than covered by £130.7m in realisation proceeds, allowing SLPET to invest a further £20.2m in three secondary transactions. The manager emphasises the importance of maintaining capital discipline, reporting that a number of secondary transactions were declined due to high price levels, noting that average prices for buyout fund interests have risen to represent only a 2% discount to NAV, with many strongly performing funds often being traded at a premium to NAV of 5% or more.

The manager’s approach means that SLPET’s portfolio is predominantly focused on private equity managers that historically have been able to generate value through operational improvements and strategic repositioning of investee companies. The manager expects these factors to continue to contribute significantly to value creation going forward, and notes the 9.1% average portfolio EBITDA growth over the year to end-June 2017 on 8.7% revenue growth, with continuing positive earnings growth subsequently reported by many of the funds.

The manager highlights the broadly diversified maturity profile of SLPET’s portfolio, albeit with 36% of the underlying holdings in the five years or older category, and typical holding periods of four to six years for private equity backed companies. This is viewed as providing additional potential for near-term value creation as historically there has been a c 25% average uplift to investee company valuations on exit.

Asset allocation

Investment strategy and process

SLPET primarily invests in what the manager considers to be Europe’s leading private equity buyout funds. The manager aims for the portfolio to comprise c 35 to 40 active fund investments, providing exposure to an underlying portfolio of around 350 private companies, giving a broad diversification by country, industry sector, maturity and number of underlying investments. The investment team’s extensive fund and direct deal experience gives the manager a strong insight into the strategies of the funds considered for investment, as well as the processes and disciplines of the private equity managers, which is considered to lead to better qualitative judgements being made.

There has been a gradual increase in the importance to SLPET of the private equity fund secondary market, where the manager can acquire or sell selected fund interests to adjust portfolio exposures as well as to maintain capital efficiency. Secondary investments typically generate lower absolute returns, but higher internal rates of return (IRRs) can be achieved due to their shorter holding periods. Secondary interests that are partly or fully invested when acquired also have a lower risk profile than primary commitments, as underlying holdings can be evaluated prior to purchase.

The manager follows a systematic, disciplined approach to investment selection, monitoring and realisation. From a universe of c 800 institutional-grade private equity funds in Europe that are monitored, 100 to 150 funds are screened for investment each year, with around 25 of these shortlisted and subjected to detailed review. SLPET typically makes around four to six primary and secondary investments each year.

Fund commitments are made in excess of SLPET’s currently available capital, based on a detailed analysis of scheduled and projected portfolio cash flows, in order to maximise the level of invested assets and reduce cash-drag on performance. However, commitment levels appear relatively conservative, with fund drawdowns lower than realisations in each of the last five financial years. SLPET has non-sterling currency exposure primarily to the euro and US dollar. This is unhedged, but cash and debt are held broadly in proportion to the currencies of outstanding fund commitments.

Current portfolio positioning

At 30 September 2017, SLPET’s portfolio comprised 51 private equity fund interests, which were collectively invested in a total of 374 separate companies. While the portfolio is broadly diversified, SLPET’s focused approach is reflected in the concentration of its top 10 fund holdings (see Exhibit 2) which represented 47.7% of NAV and 56.6% of the invested portfolio at 30 September 2017. On a number of occasions, SLPET has invested in successive funds run by individual managers, and the top 10 managers accounted for 58.9% of NAV. The top 10 underlying company holdings accounted for 17.6% of NAV (see Exhibit 1), with eight companies each representing more than 1.0% and the top three companies together representing more than 10.0%, a level at which they can make a material contribution to portfolio returns, thus differentiating SLPET’s exposure and performance from the wider private equity market.

Exhibit 2: SLPET’s top 10 private equity fund holdings as at 30 September 2017

Fund

Strategy

Vintage

No. of invts

Remaining commit-ments £m

Residual cost £m

Valuation £m

Net multiple

% of NAV

30 Sept 2017

30 Sept 2016

3i Eurofund V

European mid-market buyouts

2006

5

2.0

16.1

51.0

2.4x

8.5

7.6

IK VII

Northern European mid-market buyouts

2012

15

1.5

24.4

33.9

1.4x

5.7

5.8

Permira V

Transformational buyouts globally

2014

18

1.9

21.6

31.4

1.4x

5.2

4.5

BC European Capital IX

European and US mid to large buyouts

2011

18

0.2

20.5

28.6

N/A

4.8

4.9

Nordic Capital Fund VIII

European complex buyouts & global healthcare

2013

14

9.4

15.4

27.2

1.8x

4.5

3.0

Equistone Partners Europe Fund IV

European mid-market buyouts

2011

20

1.3

17.1

23.5

2.0x

3.9

5.0

Nordic Capital Fund VII

European complex buyouts & global healthcare

2008

13

1.6

27.5

23.2

1.3x

3.9

2.7

Montagu IV

Northern European mid-market buyouts

2011

10

2.4

15.4

23.1

1.7x

3.9

4.0

Exponent Private Equity Partners III

UK mid-market buyouts

2015

10

6.9

21.1

22.8

1.1x

3.8

1.9

Equistone Partners Europe Fund V

European mid-market buyouts

2015

20

8.2

16.7

21.2

1.3x

3.5

2.8

Top 10 holdings

143

35.3

195.8

285.8

47.7

45.9

Source: SLPET, Edison Investment Research. Note: Commitments, cost and valuation figures relate to SLPET’s interest.

SLPET made four new primary commitments totalling £110.1m in FY17, all to funds run by managers already represented in the portfolio. Three secondary investments totalling £20.2m were made during the year, all in funds that were already held in the portfolio, with an associated £2.1m of outstanding commitments as at end-September 2017.

Exhibit 3: Portfolio diversification by geography and sector at 30 September 2017

Geographic location of underlying investments by portfolio value

Underlying investments sector exposure by portfolio value

Source: SLPET, Edison Investment Research

Exhibit 3 shows SLPET’s geographic and sector exposures at end-September 2017, illustrating the portfolio’s broad diversification, which is the outcome of the investment process. Despite the restriction on investing outside Europe being removed in January 2017, SLPET’s exposure to North America has actually declined to 16% from 21% a year earlier. Sector exposures at end-September 2017 are similar to a year earlier, with the greatest changes being a 3pp increase in industrials and a 2pp decrease in consumer services.

Performance: Medium-term NAV returns ahead of peers

Exhibit 4 illustrates the strength of SLPET’s share price total returns compared with its NAV total returns over one, three and five years to 31 December 2017, which is reflected in the significant narrowing of its discount over this period, with a similar trend demonstrated by its European private equity peers, represented by the LPX Europe index. As shown in Exhibit 5, SLPET’s NAV total return modestly outperformed the LPX Europe index over three and five years to 31 December 2017, while underperforming over one and 10 years. Compared with global private equity peers, represented by the LPX 50 index, SLPET’s NAV total return has outperformed over one, three and five years. SLPET’s share price total returns have trailed the LPX Europe index over all periods shown, but are ahead of the LPX 50 index over all periods less than 10 years. SLPET’s share price total returns have outperformed the FTSE All-Share and MSCI Europe indices over one, three, five and 10 years, and its NAV total returns are ahead of both indices over three and five years, although lower over one and 10 years. These performance figures are based on SLPET’s estimated NAV at end-December 2017, which does not yet incorporate year-end revaluations of underlying funds, and we note that final NAV figures have been between 1.7% and 5.1% above estimated NAV figures in each of the last four quarters.

Exhibit 4: Investment trust performance to 31 December 2017 (based on published estimated quarter-end NAV)

Price, NAV and index total return performance, one-year rebased

Price, NAV and index total return performance (%)

Source: Thomson Datastream, Edison Investment Research. Note: Three, five and 10-year performance figures annualised.

Exhibit 5: Share price and NAV total return performance, relative to indices (%)

 

Three months

Six months

One year

Three years

Five years

10 years

Price relative to LPX Europe

(0.5)

(4.1)

(2.1)

(3.6)

(6.6)

(7.1)

NAV relative to LPX Europe NAV

(5.7)

(4.8)

(5.9)

0.6

3.0

(1.1)

Price relative to LPX 50

2.5

2.5

5.8

11.2

4.8

(5.5)

NAV relative to LPX 50 NAV

(4.0)

(1.7)

1.4

4.7

2.8

(3.5)

Price relative to MSCI Europe

1.3

0.7

5.0

22.9

34.7

6.4

NAV relative to MSCI Europe

(1.3)

(3.1)

(3.9)

9.0

6.8

(1.9)

Price relative to FTSE All-Share

(1.9)

(1.6)

7.1

31.3

45.7

3.1

NAV relative to FTSE All-Share

(4.5)

(5.3)

(2.0)

16.5

15.6

(4.9)

Source: Thomson Datastream, Edison Investment Research. Note: Data to end-December 2017. Geometric calculation.

Exhibit 6: NAV total return performance relative to LPX Europe index NAV over five years

Source: Thomson Datastream, Edison Investment Research

Discount: Towards the lower end of its five-year range

As illustrated in Exhibit 7, over the last five years, SLPET’s share price discount to NAV has moved in a relatively wide range, narrowing from its five-year high of 36.3% in March 2016 to its five-year low of 7.4% in May 2017. This followed a broadly widening trend for the two years to March 2016. The discount currently stands at 14.2%, which compares to its five-year average of 19.3%.

Exhibit 7: Share price discount to NAV over five years (%)

Source: Thomson Datastream, Edison Investment Research

Capital structure and fees

SLPET has 153.7m ordinary shares in issue, unchanged since August 2016 (Exhibit 1). The board considers share repurchases in the context of efficient capital management, alongside new fund commitments, secondary fund purchases and dividend payments. At 31 December 2017, SLPET’s £80m credit facility (which expires in December 2020) was undrawn and £107.2m was held in cash, money market funds and listed equities, equating to an 18.0% net cash position. To reduce cash drag, as part of SLPET’s cash management process, £14.8m of the £107.2m was held in two listed equities, one of which is the manager of a secondary interest recently purchased by SLPET.

From FY17, SLPET pays SL Capital an annual management fee of 0.95% of NAV and there is no performance fee. Previously, SLPET paid a 0.8% pa management fee, with a five-yearly incentive fee of 10% on returns above 8% pa. Ongoing charges (excluding indirect fund fees) in FY17 were 1.14%, which compares to 0.99% in FY16 excluding incentive fees.

Dividend policy and record

The board believes that a strong, stable dividend is attractive to shareholders and took the decision in late 2016 to increase the annual dividend to 12.0p per share for the year ending 30 September 2017, more than double the total dividend for FY16. The board is committed to maintaining the real value of the dividend from this level, in the absence of unforeseen circumstances. Additionally, having introduced an interim dividend in FY15, the board has decided to move to quarterly dividend payments, comprising three interims and a final dividend, which will continue to be subject to shareholder approval. Four quarterly payments of 3.1p are planned for FY18, and the 12.4p total dividend represents a prospective yield of 3.7%. A 6.0p interim dividend was paid in July 2017 and a 6.0p final dividend for FY17 was paid in January 2018. Deducting the 6.0p final dividend, SLPET’s revenue reserves at end-September 2017 equated to 1.7p per share. Future dividends will be paid from capital and revenue earnings, with the 12.0p payment comparing to SLPET’s FY17 total earnings per share of 68.74p.

Peer group comparison

Exhibit 8 shows a comparison of SLPET with a peer group of private equity funds of funds from the AIC Private Equity sector. SLPET’s NAV total return to end-December 2017 (based on its published estimated quarter-end NAV) is ahead of the eight-fund peer group average over one, three and five years but below the six-fund average over 10 years. SLPET’s share price discount to NAV is lower than the peer group average, and distinctly narrower than the 16.9% average discount when excluding Aberdeen Private Equity (which has proposed a portfolio sale and return of capital). SLPET’s 1.14% FY17 ongoing charge (excluding indirect fees) is one of the lowest in the peer group, and it is among the minority of peers that do not levy a performance fee. SLPET is ungeared, similar to the majority of peers, and its 3.7% yield, which reflects the planned 12.4p FY18 annual dividend, is above-average among the dividend-paying funds in the peer group.

Exhibit 8: Selected private equity fund of funds peer group as at 6 February 2018*

% unless stated

Region

Mkt cap £m

NAV TR 1 Year

NAV TR 3 Year

NAV TR 5 Year

NAV TR 10 Year

Discount (ex-par)

Ongoing charge

Perf. fee

Net gearing

Dividend yield (%)

Standard Life Private Equity

Europe

515.1

10.8

55.4

88.4

75.4

(13.7)

1.14

No

100

3.7

Aberdeen Private Equity

Global

156.6

1.8

36.1

58.9

66.9

(1.0)

1.87

Yes

100

2.8

F&C Private Equity Trust

Global

227.7

4.9

43.4

69.4

94.2

(13.0)

1.27

Yes

88

3.8

HarbourVest Global Private Equity

Global

966.3

6.2

52.7

109.7

(19.6)

2.17

No

100

ICG Enterprise Trust

Europe

538.9

16.3

46.4

73.0

109.4

(15.5)

1.28

No

100

2.6

JPEL Private Equity

Global

229.3

2.2

61.0

81.3

47.2

(16.2)

1.86

Yes

100

NB Private Equity Partners

Global

464.5

1.6

51.0

106.9

(21.9)

2.28

Yes

100

3.9

Pantheon International

Global

974.1

7.6

48.6

86.4

113.6

(18.1)

1.13

Yes

100

Average

509.1

6.4

49.3

84.3

84.4

(14.9)

1.63

99

3.3

Trust rank in peer group

4

2

2

3

4

3

7

1

3

Source: Morningstar, Edison Investment Research. Note: *Performance data to 31 December 2017. TR = total return. All returns expressed in sterling terms. Net gearing is total assets less cash and equivalents as a percentage of net assets (100 = ungeared).

The board

SLPET’s board comprises five independent non-executive directors, with Calum Thomson joining the board on 30 November 2017 to replace Alastair Barbour, who stepped down at the end of 2017 after nearly seven years as a director. Thomson is a qualified accountant with over 25 years' experience in financial services. He has been a partner at Deloitte for 21 years, and is a director of Diverse Income Trust, British Empire Trust and Baring Emerging Europe. This follows another board change on 7 June 2017, when David Warnock retired after almost nine years and Diane Seymour-Williams was appointed as a director. Seymour-Williams spent 23 years at Deutsche Asset Management and nine years at global emerging markets specialist, LGM Investments, and is a director of Witan Pacific Investment Trust. Edmond Warner (appointed November 2008) has been chairman since January 2013; he is also chairman of BlackRock Commodities Income Investment Trust. Senior independent director, Christina McComb (appointed January 2013) has a private equity and venture capital background, having spent 14 years with 3i Group. Alan Devine (appointed May 2014) has 40 years' experience in commercial and investment banking.

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The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research. Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2018. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority (Financial Conduct Authority). Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Pty Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2018 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Standard Life Private Equity Trust and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable; however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Investment Research Pty Ltd (Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd (AFSL: 427484)) and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research. Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2018. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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JPMorgan Global Growth & Income — Value-focused growth fund with 4% distributions

JPMorgan Global Growth & Income (JPGI) has enjoyed a strong period of share price performance since adopting a higher distribution policy in mid-2016. NAV returns have also kept pace with the benchmark MSCI AC World index, in spite of the trust’s focus on long-term valuations in an environment where market returns have been driven more by ‘growth at any price’. JPGI is the only UK retail investment product offering access to J.P. Morgan Asset Management’s (JPMAM’s) global focus investment process, which uses a large team of expert sector analysts to identify undervalued stocks with significant profit potential. Manager Jeroen Huysinga remains positive on the global economic outlook for at least the next 12-18 months, and has been finding particular opportunities in industrial cyclicals and financials, while being significantly underweight in technology stocks.

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