28 Oct 2022 09:42
London, UK, 28 October 2022
Edison issues update on abrdn Private Equity Opportunities Trust (APEO)
abrdn Private Equity Opportunities Trust (APEO) has so far successfully navigated the challenging macro environment, reporting an NAV total return (TR) from end-2021 to end-September 2022 (based on NAV estimate) of 7.5%. Distributions from underlying funds remain firm with c £210m in FY22 (ending September), largely covering APEO's FY22 capital calls (c £250m) and fully covering them in CY22 year to date. However, APEO recently upsized its credit facility to £300m (from £200m previously), which improved its commitment coverage ratio to c 39% and its balance sheet headroom as it sees some softening in private equity (PE) exit activity. The larger credit facility also supports APEO's new investments after a solid pace was maintained in FY22 at £338m (ie 33% of opening NAV versus 26% on average in FY17-21). APEO continues to pay a quarterly dividend, currently 3.6p (up c 6% y-o-y), which implies an annualised yield of 3.3%.
The company's good NAV performance was accompanied by a decline in its share price by c 23% year to date (in TR terms). Consequently, its discount to NAV widened from 18% at end-2021 to 42% currently (reflecting a broader trend across listed PE fund-of-funds). Investors likely anticipate continued pressure on private company valuations (which may increasingly come from slowing earnings growth). Having said that, while a further de-rating of APEO and other listed PE companies (alongside the broader market) cannot be ruled out, we believe that the current discount to NAV (together with APEO's strengthened balance sheet) represents a certain degree of downside protection for long-term investors.
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