What’s happened at 3i Group and is it now cheap?

A sign for the Dutch-based discount retailer Action in Bavaria, Germany. Photo: Michael Nguyen/NurPhoto via Getty Images.

It has been a bruising month for investors, with many funds sitting on double-digit losses since the outbreak of conflict in the Middle East. But one of the worst offenders cannot simply blame markets for its poor performance.

3i Group Ord (LSE:III) is a name well known to many. Having returned 600% over the last decade and still comfortably ranking as the biggest UK investment trust by market capitalisation even after recent losses, its sheer success has often led the shares to trade on a big premium to net asset value (NAV) in the past.

That reached an extreme in late 2025 when the premium approached the 70% mark – setting the shares up for big losses as challenges emerged.

• Invest with ii: Open a Stocks & Shares ISA | ISA Investment Ideas | Transfer a Stocks & Shares ISA

We first had a big sell-off from the end of October. The shares steadied in the new year and resumed their descent in February, before plunging more severely in the last few days. 

Source: FE Analytics. 2026 return as of 30 March. Past performance is not a guide to future performance.

This leaves us in the unusual situation where the trust’s premium has completely evaporated and the shares now sit on a big discount, putting it in similar territory to other names in the AIC’s Private Equity sector.  

Some ii customers have duly bought the dip, but it’s worth asking what frightened investors in the first place, and what we need to know now. 

Why was it up, and why is it down? 

From its massive premium to its painful recent losses, much of 3i Group’s recent behaviour can be explained with one word: Action. 

For those who don’t know it, Action is a Netherlands-based discount retailer that has grown substantially across Europe since it opened its first store in 1993. 3i Group has run this winner to the extent that it represented around three-quarters of the portfolio at the end of last year.

Action’s importance in the portfolio is obvious from the fact that, in a five-page update on 3i Group published in January, the company received some 50 mentions.

Source: 3i Group, end of 2025.

This has a few ramifications. Because Action is a private company, 3i Group is the only way to make such a big bet on its impressive growth story (note that NB Private Equity Partners Class A Ord (LSE:NBPE) has a much smaller 6% weighting, for example). The premium that has long been a feature of the trust seems to reflect this.  

But the sheer presence of one holding in the trust opens it up to huge company-specific risk. Combine that with a stretched valuation and it can have a long way to fall if anything happens to disappoint investors. Had you invested in early May 2025, when the premium appears to have hit its peak, you would currently be down to the tune of around 44%.

As Cavendish’s Will Crighton puts it of the fund’s performance in recent years: “It’s easy to say now, but that rally looked to be getting out of hand. A premium that excessive was odd, even given the strong growth from Action.” 

What triggered the sell-off 

The problems first began for 3i back in November, when an update warned that sales growth was softening for Action in France.  

That represents its biggest market, accounting for 914 stores at the end of 2025 (versus 649 in the second highest, Germany) and around a good chunk of the company’s sales. 

It should be clear that the company still enjoyed sales growth in France, but that this slowed. Updates suggest the French consumer is under pressure and spending less, with this having a knock-on effect on Action. 

Source: Action.

That’s troublesome when investors are so accustomed to growth – and when the valuation on 3i Group had reached such a high.  

The trust has since moved from one challenge to the next.  

The shares steadied in very early 2026 but showed weakness in February as a risk-off mood set in among investors. The shares have struggled further during the conflict in the Middle East, and an update from Action on Thursday again set the cat among the pigeons. 

• Five AIM income stocks for your ISA in 2026
• Four tips for ISA investors to navigate stock market volatility

Here, Action pointed to its successful launch into two new markets, Switzerland and Romania, in 2025. But weakness in France continued to cast a shadow. The company also outlined plans to expand into the US, a market that could be viewed as competitive and hard to crack. 

UK investors still likely have a few scars from when retailers best known to them tried to break the US.  

An obvious example from relatively recent history is Tesco (LSE:TSCO), which had an ill-fated foray into that market and later required a turnaround under Dave Lewis, now at the helm of Diageo (LSE:DGE). 

Customers in an Action store in France. Photo: Nicolas Guyonnet/Hans Lucas/AFP via Getty Images.

What’s priced in? 

The shares trade on a 23.5% discount, a stark contrast to the trend of the last 12 months, where they have tended to trade on an average premium of 36.3%. 

What investors might now need to weigh up is greater uncertainty and volatility. Charles Murphy, senior research analyst for Singer Capital Markets, notes that Action’s planned investment in the US is big in absolute terms but not in the context of its broader revenues. He puts the spending at around 5% of EBITDA (earnings before interest, taxes, depreciation and amortisation) a year, over the next four years to “see if they can get America to work”.

Action’s current plan is to open its first store in the US at either the end of 2027 or in early 2028, with a focus on the states of North Carolina, South Carolina and Georgia, owing to the fact that these regions have fast growth, have diverse populations (so Action can test strategies with different customer groups) and have many medium and large towns. The company’s goal is to have around 100 stores in the US by the end of 2030. 

• Fund Focus: where to hide in the market sell-off?
• The funds and investment trusts treading a different path
• Where to look for income during turbulent times

Action will deploy many of the tactics that have made it successful over the years, from refreshing a decent chunk of its range to staying focused on price competition versus rivals. But the US venture could well come with hiccups. 

As Murphy puts it: “If it works it creates an amazing runway for another decade of growth.” But the expansion requires significant work – including building distribution centres in the US. 

“That’s your big risk - not the money involved but the senior management time involved in saying ‘Let’s build stores in the States and see if it can work’,” he adds.  

As with slowing growth in France, any blips in the US plans could prompt 3i Group shares to fall again. 

But Action retains plenty of appeal, especially in its ability to keep rolling out stores in Europe and target new geographies.  

It has lots of white space, the retail term to denote untapped opportunities, and new geographies yet to enter. And with 3i Group shares on a big discount, investors do have some margin of safety. 

Source: AIC, 30/03/26.

Is it even a fund? 

Funds with private holdings can often end up being pretty concentrated, as names such as Seraphim Space Investment Trust Ord (LSE:SSIT) and Chrysalis Investments Limited Ord (LSE:CHRY) have demonstrated. 

But the extreme concentration of this particular portfolio makes investing in 3i Group more akin to buying an individual share than a portfolio. Investors should size their position in line with the risks that this can bring. 

As the table shows, discount delvers have plenty of opportunity in the private equity space.

• Exiting these Saba trust targets? Here are some fresh ideas
• Sign up to our free newsletter for investment ideas, latest news and award-winning analysis

Names that take concentrated bets but still diversify, like Oakley Capital Investments Ord (LSE:OCI), have a good track record, while the likes of Pantheon International Ord (LSE:PIN) and HarbourVest Global Priv Equity Ord (LSE:HVPE) give a high level of diversification. 

These funds are not without their problems, from higher interest rates to the presence of value and activist investors (such as Saba with Pantheon International). But they behave more like funds, and less like a retail stock, than 3i Group.