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Schroders makes a prudent retreat from private equity

Schroders’ multi-manager team has reduced its exposure to private equity firms after two of its investments reached a premium to net asset value.

SVG Capital and Candover Investments, which invest using the Ucits III regulations, have been held in the Schroder S&P high alpha portfolio since its inception in September 2004, returning 28.5 and 25.2 per cent respectively.

On the back of this, the team has decided to reduce its exposure to private equity from a high of 9.6 per cent to 3.7 per cent.

Head of multi-manager Andrew Yeadon says while private equity has provided strong returns over traditional asset classes, the share prices of these companies have reached a premium to net asset value.

He sees this as a signal to reduce exposure and will reinvest when valuations are more reasonable.

Yeadon says: “One of the main reasons for strong private equity performance has been the availability of cheap debt, which has created a very positive environment for realisations.

“However, the current buying interest in private equity assets has made it more difficult for firms to acquire new investments at reasonable prices and therefore cash levels have crept up.”

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