Edison Updates on APEO: Strategies to Combat Discount and Strengthen Returns

Edison Investment Research Limited has provided an update on the performance and strategic moves of abrdn Private Equity Opportunities Trust (APEO) for the financial year 2023 up to September, highlighting how the firm has managed a challenging private equity environment. Despite subdued deal activities and foreign exchange headwinds that impacted the overall sector, APEO reported a noteworthy total net asset value (NAV) return of 5.4%, with portfolio value increasing by 9.4% when excluding foreign exchange impacts. This performance is attributed to APEO’s successful pivot towards direct investments since 2019, boasting an 18.5% value increase in FY23.

APEO has maintained a robust balance sheet, supported by a coverage ratio of approximately 35% by the end of January 2024. This financial stability was further demonstrated by effective capital call management and the strategic partial exit from Action at 100% of NAV. Adding to its strategic initiatives, APEO initiated a buyback program that resulted in a circa 10% increase in share price since its announcement. However, the trust still trades at a 29% discount to NAV, compared to its 10-year average of 23%.

The trust’s investment approach focuses on mid-market private equity opportunities, leveraging a portfolio managed by top-tier European general partners. This strategy has consistently outperformed benchmarks, offering investors about 15% annual returns over five- and 10-year periods, aligning closely with industry peers. APEO’s commitment to sectors perceived as less cyclical, such as technology, healthcare, and consumer staples, aligns with its aim to provide resilience amidst current market challenges.