Investors slowly warming to PEITs

Although many financial planners still have very limited awareness of private equity investment trusts, increasing demand from retail investors and a concerted marketing push may be starting to turn the tide.

A new survey of UK financial planners has revealed there is still a relatively low level of awareness about private equity investment trusts, the listed vehicles that allow retail investors as well as institutions to access the asset class.

Just 19 percent of respondents were currently investing in PEITs on behalf of their clients, according to the study, which was based on a survey of almost 150 financial planners. Most also said that information on PEITs was too difficult to find for those who were unfamiliar with the market.

The results show that there is plenty of work to do for iPEIT, which conducted the survey. The marketing initiative, which was set up by ten of the leading investment trusts to promote greater awareness of the sector, has already produced a website designed to provide investors with more information about PEITs.

But the survey also revealed some good news. There are clear signs that retail investors are showing a greater interest in increasing their exposure to the sector, with about a third of respondents reporting that they had received enquiries from clients keen to invest in private equity. This extra demand is already starting to have an effect – 28 percent of those who had never invested in PEITs before were planning to do so for the first time this year.

Furthermore, those that have invested in PEITs seem to be glad they did. 90 percent of those currently investing said they would maintain or even increase their exposure, while just over three quarters expressed satisfaction with the performance of their PEITs. And investors seem to be in it for the long haul – all of them intended to hold their PEIT investments for at least three years, and the vast majority for at least five years.

Ross Marshall, chief executive of Dunedin Capital Partners, said he was encouraged by the findings, and suggested that uptake would increase as different mechanisms emerge. “I am sure financial planners will find ways of accessing the relevant investment vehicles via platforms and wrap technology, not only to meet client demand but also to ensure business efficiency and minimise costs,” he said.

There are about 20 PEITs listed on the London Stock Exchange, with a combined asset value of about £10 billion. The sector as a whole is currently trading at a premium to net asset value, driven by the consistently strong results of the likes of Candover, 3i and HgCapital. Others, like the trusts managed by August Equity, Mithras and Dunedin, still trade at a discount to net asset value – although this could be seen as a value opportunity for investors.