The trust has been trading on a slight premium recently in recognition of its excellent long-term track record.
However, disappointing NAV results reported this morning have seen it sink back to trade level with net asset value, which Lovett-Turner says could be an opportunity to strike.
"If you look at it from a long-term perspective, it is one of the best-performing private equity funds out there and perfect for a long-term core holding," he said.
"It’s a management group you would say you were happy to be investing with for the long term."
The trust has been trading on an average discount of 8.45 per cent over the past three years, which could lead some investors to question how cheap it really is.
However, this includes a period when private equity was very much out of fashion, a situation that has changed only over the last 12 months.
Lovett-Turner says that for the long-term investor, a pull-back like this represents a great opportunity.
"Whilst we can understand some weakness in the stock on the back of a lower-than-expected NAV, we would regard any over-reaction as an opportunity to buy," he said.
"HgCapital Trust has an outstanding long-term track record of creating value for investors in the medium- and long-term, having delivered NAV growth of 15.4 per cent per annum over the past decade versus 9 per cent per annum for the FTSE All Share."
"We believe its portfolio of European growth companies remains well placed to delivered attractive returns to HGT shareholders."
Data from FE Analytics shows the trust has made a massive 523.77 per cent in share price terms over the past 10 years, compared with 130.66 per cent for the FTSE All Share and 123.38 per cent for the average publicly quoted equity fund in the IMA UK All Companies sector.
The NAV total return figure is 438.85 per cent over that time, according to the AIC.
Performance of trust vs index and sectors over 10yrs
Source: FE Analytics
Particularly impressive is the trust’s performance in the financial crisis. Most private equity funds suffered badly, with the average portfolio seeing a maximum drawdown of 65.99 per cent. This represents what investors would have lost if they had bought and sold at the worst possible moments, effectively showing what happened during the 2007/2008 crisis.
Publicly quoted equities also did badly, with the FTSE All Share suffering a maximum drawdown of 45.28 per cent over the period. However, HgCapital lost only 27.78 per cent, roughly half of this amount.
The trust has also outperformed in a good 12 months for the sector, making 31.8 per cent in share price terms compared with the 25.93 per cent of the average private equity trust.
Performance of trust vs index and sectors over 1yr
Source: FE Analytics
However, it has been knocked off course by a set of results that have surprised the market.
NAV was recorded at 1.172.8p, down from 1,221.7p at the start of the year, a fall of 2.2 per cent allowing for the dividend.
Chief financial officer Stephen Brough says that there are three reasons for this, chief among which is the decision taken to write down two of the trust’s assets – Lumesse and NetNames.
Lovett-Turner says that the write-downs reflect the trust’s conservative valuation policy, which is a reason to be more confident in the valuations it applies to all of its businesses.
Furthermore, he points out that the trust has a track record of writing down businesses and then revaluing them when they have turned around their profitability.
"You don’t want people to be too aggressive on the downside, but they have done well out of such situations in the past," he said.
Two such examples are JLA, the laundry business, which is now valued at 1.4x cost, and SHL, the psychometric testing company, which was sold at 3.1x cost having been written down to 0.25x cost in 2009.
The second reason is that the portfolio has held about one-third in gilts over the past year as a cash proxy. In a low interest-rate environment, this has translated into a loss.
Lovett-Turner says that although this is a high proportion, it is not unknown in private equity, following a raft of disposals such as HgCapital carried out, and the managers have an excellent track record of judging their cash weighting correctly.
"Historically they have been the best in the sector in timing their investments and realisation cycle with the general economic climate," he said.
"They have tended to have cash available when there have been good opportunities to invest."
The third reason is that the portfolio is relatively "immature", with 25 per cent of the investments owned only since 2009.
"It means we are yet to see an increase in the price of the assets relative to the price we paid for them," Brough said.
However, not everyone agrees with this positive perspective. Iain Scouller, analyst at Oriel Securities, has downgraded the trust to "sell" from "hold" on the back of the results.
Scouller says that the trust’s performance is particularly worrying given the decent performance of others in the sector.
"If you look at other funds in the sector they have seen NAV rise 30 per cent in some cases," he said.
"What surprised me was the extent to which they were struggling in what should be a pretty good environment for private equity."
"If it was trading on a discount of 15 per cent, I would see it as a buying opportunity, but when you look at the discounts the other funds in the sector are on, I think that is questionable," he said.
Scouller says that the high cash weighting will continue to drag on the company, while the retirement of chairman Ian Armitage from the company in November of last year, after 25 years, could be having an effect.
Investors will need to assess if the retirement of Armitage from "deal-doing" has had an impact on the type of deals carried out more recently and the returns, he warned.
Scouller eyes up a target price of 1080p and estimates NAV will be around 1180p to 1220p at the end of the year.
Ongoing charges on the trust are 2.32 per cent, according to the AIC.
