Electra Private Equity
"The one that immediately springs to mind is Electra Private Equity, which has been hit extremely hard recently," says Peter Walls (pictured right), manager of Unicorn Mastertrust – an open-ended fund of investment trusts. "Like all listed private equity companies, it bombed during the summer, and is now on a discount of 33 per cent. If, like me, you don’t think the world is going to end anytime soon, it’s a good option."
"Its underlying holdings have been doing very well, and though earnings are likely to moderate, the discount more than makes up for that. I can see the discount coming down to 20 per cent relatively quickly."
"It’s a big fund with a good track record, and has a very experienced management team headed up by Hugh Mumford."
According to FE Analytics, Electra Private Equity appears in the top-10 holdings of the Witan Investment Trust and the British & American Investment Trust.
The £136m S&W Smithfield fund also holds the trust in its top-10.
Standard Life European Private Equity
James Brown (pictured left), analyst at Winterflood Securities, also thinks there are some major opportunities in the Private Equity sector. "The sector is trading on a market cap-weighted average discount of around 35 per cent," says Brown.
"However, levels of gearing and outstanding commitments are considerably lower than they were at the comparable stage in 2008 and as a result, the prospect of dilutive rights issues or strategic disposals still looks remote at this stage."
"For this reason we think current discounts are excessive, and for those able to take a medium- to long-term view, current prices provide an attractive entry point."
"The Standard Life European Private Equity investment trust is on a discount of 44 per cent. It invests in European mid-market buyout funds and is managed by Peter McKellar and David Currie of Standard Life Capital Partners."
"The portfolio is exposed to over 500 underlying companies, although the top-30 account for 42 per cent of the fund’s net assets. The fund’s gearing has decreased over the last few years and was 14 per cent of net assets as at 31 March."
"The management team is taking a cautious and measured approach to new commitments, reflecting their concern over macro issues."
Like Walls, Brown also rates the Electra Private Equity investment trust as a potential bargain.
"It has benefited recently from two substantial disposals," he says. "It’s one of the more conservatively positioned funds, holding considerable levels of cash. In addition, the levels of debt at the underlying level are far lower than in many private equity funds."
"A combination of the management team’s opportunistic approach and the disposal of some legacy holdings have led to some decent NAV uplifts over the last few years."
"Other funds that we would highlight as attractive value plays include Dunedin Enterprise, which is on a 44 per cent discount, Pantheon International, which is on a 45 per cent discount, and Graphite Enterprise, which is on a 36 per cent discount," Brown added.
European investment trusts
Although the sovereign debt crisis in Europe has put a lot of investors off the area, Iain Scouller, analyst at Oriel Securities, says there are a number of cheap options for those with a more optimistic outlook.
"Many of the European trusts have seen their discounts widen out, which is not really surprising given the recent market backdrop," says Scouller.
"Trusts on relatively wide discounts include TR European Growth on a 19 per cent discount, which is the widest for the past 6 months and compares with a range of 19 per cent to 13 per cent."
"JP Morgan European Smaller Companies is on a 17 per cent discount, which is also the widest level for the past year. Henderson Euro Trust is in a similar position, with the discount at 15 per cent."
Aberdeen All Asia
"If positive on the Asian region as a whole, we think the best value can be found in Asia inc Japan funds, like Aberdeen All Asia, which is currently trading on a 17 per cent discount," Scouller added.
Jupiter Fund of Investment Trusts holds Aberdeen All Asia in its top-10.
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