Ian Cowie: signs of hope for this investment trust giant?

Our columnist looks at a private equity beast in freefall.

28th May 2026 10:42

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Britain’s biggest investment trust has suffered a 43% share price slump over the last year but its chief executive invested more than £1 million earlier this month, prompting hopes of recovery.

Here and now, this fund with total assets of more than £31 billion has seen its shares switch from trading above their net asset value (NAV), or a premium of more than 50% last year, to plunge below NAV and be priced at a discount of 24% this week.

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But bargain hunters had better beware that it’s by no means clear this extreme reversal of fortunes will lead to a happy ending at 3i Group Ord.

This giant of the Association of Investment Companies (AIC) Private Equity sector - although not an AIC member - demonstrates the potential downside of being priced for perfection.

High hopes for capital growth from its portfolio of businesses that are not listed on any stock market had delivered sector-leading returns over the last decade and five-year periods of 502% and 114% respectively.

But then 3i - formerly known as Investors in Industry  - disappointed the market by reporting slower growth at its biggest underlying asset, prompting the share price slump mentioned above.

It all adds up to an extreme example of the risks of valuing unlisted assets - and the dangers of failing to diversify. Nearly £24 billion or about three-quarters of 3i’s NAV is invested in the Dutch discount retailer, Action.

That was popular when the cut-price household goods chain was advancing across France and Germany, but recent reports of slowing sales soured Mr Market’s mood.

Also, Action’s announcement of plans to expand into America - where several European retailers have failed before - did nothing to lift the spirits or share price.

Now news that 3i chief executive Simon Borrows has invested £1.1 million, paying £22.29 per share earlier this month, may help to improve the mood.

It’s encouraging to see senior insiders with substantial “skin in the game” because that means, whether they are right or wrong, they will share ordinary investors’ pleasure or pain.

In the meantime, 3i yields nearly 3.7% of dividend income. Better still, this has increased by an eye-popping annual average of 17% over the last five years, according to LSEG.

It’s important to be aware that dividends are not guaranteed and can be cut or cancelled without notice.

However, if 3i’s current rate of ascent could be sustained, it would double shareholders’ income in four years and three months.

As you might expect, none of 3i’s other underlying unlisted assets could be described as a household name, although a mixture of industrial pump-makers and software companies is leavened with more familiar businesses, such as the European Bakery Group.

Another top 10 asset, Audley Travel, stands to gain from the “grey pound” and “bucket lists” or - more formally - growing demand for bespoke holidays.

While the past is not a guide to the future, 3i’s former holdings include higher-profile businesses including the underwear maker Agent Provocateur; the self-descriptive Chiltern Railways; and the global architects Foster + Partners.

Ongoing charges of 0.59% demonstrate economies of scale and do not seem unreasonable to manage such a wide range of assets.

While 3i suffers its annus horribilis, HarbourVest Global Priv Equity Ord is the sector leader over the last year with a total return of 35%, following 59% over five years and 247% over the last decade. HVPE, which has assets of £3.3 billion, pays no dividends and the ongoing charge is 0.98%.

To be fair, Pantheon International Ord is less than a single percentage point behind over the last year; returning 34%, following 50% and 210% over the medium and long term. PIN, which has assets of nearly £2.5 billion, is another non-yielder and its ongoing charge is 1.35%.

All the above numbers suggest the Treasury was right to amend its original proposals to allow company pensions to increase their exposure to unlisted assets by holding private equity investment trusts.

As 3i’s recent experience demonstrates, this is a high-risk sector, but several investment trusts have succeeded in delivering substantial returns over the medium to long term.

Ian Cowie is a freelance contributor and not a direct employee of interactive investor.

These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

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