Intermediate Capital keeps a low profile

It has been an emerging trend over the past 18-months that more investors are looking to private equity investments, along with the private debt market and infrastructure, as a way of smoothing out the volatility associated with publicly-listed equities.

Despite the fact that many PE exits were blocked by shuttered public markets last year, the demand from investors for alternative uses for their cash continues to benefit middleman Intermediate Capital (ICG) on the evidence of these results. However, the unknown quantity is how rising interest rates might affect the demand for alternative investments.  

The asset manager, which attracts, manages and allocates investor capital into alternative funds, saw its total assets under management (AUM) increase by 14 per cent, at constant currency rates, to $80bn (£64bn) spread across a range of its PE, debt and infrastructure funds. The increase kept vital external fee income growing by 12 per cent to £501mn, at the point when its net investment returns – which are the volatile line of the income statement – tumbled by 75 per cent to £102mn, with a knock-on impact for pre-tax profits.

There was also some evidence that fund-raising, and deployment were both weaker on paper, albeit set against difficult comparators. Lower total fundraising at $10.2bn this year, compared with $22.5bn in 2022, had an impact on deployment, which was 30 per cent lower at $10.5bn. However, management said it should achieve its $40bn target for the fund-raising cycle through to 2024.

The shares have regained some value since our last buy advice and are now rated at a forward price/earnings ratio of 10 times Numis’s forecasts for 2024. That is still decent value compared with its peers. Buy.

Last IC view: Buy, 1,174p, 17 Nov 2022