There can’t be many asset managers that divide investor and analyst opinion as much as 3i (III), which as the most significant name in UK-listed private equity combines a rich history of returns, interspersed with some spectacularly ill-timed calls.
- Limited balance sheet gearing
- Strong investor backing
- Portfolio dominated by one asset
- Action’s valuation looks punchy
- Exit options have narrowed
- Easy money gone
In recent years, the going has been very good for the company and its investors – as it has for the broader private equity (PE) industry. Within private markets, portfolio valuations have boomed on a tide of cheap money and, until lately, good prospects for eventual exits. Indeed, 3i’s 176 per cent total return since 2020’s nadir is proof enough of the favourable secular trends. But now that interest rates are returning to long-term averages and the spectre of recession looms large, big questions are being asked of the debt-fuelled model that has powered PE’s bull run. It is 3i’s apparent defiance of those concerns that we think requires investigation.