3i's performance has struggled over one, three and five years, trailing its sector average by a tremendous margin both in terms of net asset value (NAV) and share price. However, the company has recently appointed a new chief executive officer (CEO) Simon Borrows, who is due to announce a new investment strategy and plans to strengthen the balance sheet at the company's annual general meeting on Friday 29 June.
He is expected to focus on 3i's core strengths such as the mid-market and retreat from markets where it does not have the required scale. He may also increase funds under management in infrastructure and debt. He has already bought back half of the company's debt which was due to be paid back in 2013, and he is expected to cut costs.
Because 3i trades on a discount to NAV of more than 31 per cent and the new strategy could result in a re-rating, some analysts such as Investec's Henry Freeman think this offers a great turnaround opportunity.
"While 3i has felt like a value-trap for much of the past year we believe there is value in 3i as a business and believe that the appointment of a new CEO, the return of capital and the strategic review should encourage a re-rating," says Iain Scouller, head of the investment funds team at broker Oriel.
However, Winterflood analysts say: "Despite trading at a discount of more than 30 per cent, we believe there are other options in the listed private equity sector which provide greater value, along with portfolios more likely to generate solid returns."
See Private equity offers value for alternative fund suggestions
3i Group (GB00B1YW4409) | |||
| PRICE | 183.58p | GEARING | 123% |
| AIC SECTOR | Private equity | NAV | 279p |
| FUND TYPE | Investment trust | PRICE DISCOUNT TO NAV | -31.20% |
| MARKET CAP | £1.79bn | 1-YEAR PRICE PERFORMANCE | -18.6% |
| No OF HOLDINGS | 101* | 3-YEAR PRICE PERFORMANCE | -3.46% |
| SET-UP DATE | 1 April 1945 | 5-YEAR PRICE PERFORMANCE | -71.33% |
| TOTAL EXPENSE RATIO | 6.46% | MORE DETAILS | www.3i.com |
| YIELD | 4.40% | ||
Source: Morningstar, *3i.
Performance data as at 25 June 2012.
Top 10 holdings as at 31 March 2012
| 3i Infrastructure |
| Peer Holdings |
| ACR Capital Holdings |
| Mold Masters Luxembourg Holdings |
| Eco US Holdings |
| Foster + Partners |
| Mayborn Group |
| NORMA Group Holding |
| Element Materials Technology |
| Scandferries Holding |
Sector Breakdown
| Business & Financial Services | 27 |
| Consumer | 22 |
| Industrials & Energy | 30 |
| Healthcare | 13 |
| TMT | 8 |
