The portfolio is currently sitting on a huge discount of 28 per cent, compared with an average of 23.1 per cent for the IT Private Equity sector.
This is despite recording an 11 per cent increase in NAV over the past year. Scouller, an analyst at Oriel, says now there is a huge opportunity to gain access to a trust that should be trading at a much higher price.
"The whole sector has value for contrarian investors who want capital growth rather than income," Scouller commented.
"At some point there will be a re-rating of the sector, and you want to get in before that happens. There’s no point following the crowd when it’s too late."
"Electra has a good long-term performance record, a conservative valuation policy demonstrated by good gains on past sales, and a strong balance sheet," he added.
"Taking into account these points, we believe Electra should trade at the narrower end of the discount range, compared with the rest of the Private Equity sector."
Scouller explains that the trust has been hit by investors’ general risk-aversion and memories of the 2008 financial crisis, which saw the sector de-rated as it suffered heavy falls.
"In 2008 it was probably on a 0 to 10 per cent discount like the rest of the Private Equity sector, and it was de-rated very heavily and the current figure is a hangover from that."
"People haven’t got a great appetite for private equity right now, they all want equity income and those trusts are trading on a premium."
Electra Private Equity, which invests in un-listed companies, has more than doubled the performance of its FTSE All Share benchmark over 10- and three-year periods, as it also has over the past year.
Over a decade it has made investors 275.8 per cent, according to data from FE Analytics, while the FTSE All Share has made 113.99 per cent.
Over three years the trust’s returns of 61.6 per cent beat the All Share’s 25.53 per cent.
However, over five years the returns are almost in line with its benchmark, the trust returning 15.95 per cent and the index 13.27 per cent.
Performance of trust vs index over 5-yrs
Source: FE Analytics
The reason for this is the huge fall the trust and Private Equity sector suffered in 2008; our data shows that Electra’s max drawdown for the period is 65.98 per cent, meaning it lost that proportion of its value when the markets were at their worst.
The volatility of the trust over that period has also been high, with the five-year annualised figure at 35.95 per cent while the All Share’s score for that period is 17.5 per cent.
"Private equity is a leveraged play on the markets, so tends to be more volatile," Scouller said.
Electra reported that although the general market is currently depressed, the trust itself has a strong pipeline of new deals it is working on.
"They have six potential deals at the moment and they are working on another 20 as possibilities, although they won’t say at what stage they are," Scouller added.
Oriel expects modest portfolio growth in the next six months and has increased its NAV target from 2,500p to 2,540p at March 2013.
It has also increased the trust's six-month price target to 2015p, which represents a 20 per cent discount to estimated NAV.
Electra is considered a split-capital trust by the AIC, due to the presence of a zero-dividend preference share that ranks higher than the ordinary shares for repayment.
The share is due to mature in 2016, but Scouller says it should not concern investors. First he says that the volume of shares is not significant, and secondly that the net cash position of the trust is strong, at 5 per cent.
As a consequence, the ZDP shares are effectively a credit line that the trust is not using, he explains.
The fund has an on-going charges figure of 2.4 per cent.