PI Global Investments
Private Equity

How A Listed Fund Helps Widen Private Equity Investor Access


There has been a tectonic shift towards private market investments and away from the listed stock market over the past twenty years. We speak to a private equity house that uses a listed fund as part of its strategy for ordinary investors to get a piece of the action.

It is becoming more necessary for investors – not just the
wealthiest – to tap into private equity because unlisted firms
account for an increasingly large part of the world economy. It
has become a commonplace observation that listed firms aren’t as
common as they used to be. 

But, if that’s the case, regulations and other barriers to
entering the non-listed market create a headache if the goal
is to encourage the general public to build long-term,
diversified capital for retirement and other goals. Maybe this is
where those “listed alternatives” can fix the problem. 

This news service recently spoke to Steven Tredget, partner at
, a business founded in 2002. It typically takes
majority stakes in firms, mostly European ones. It bolsters
management teams and aims to build value and performance. The
firm can also make minority investments. Oakley has about €5
billion ($4.95 billion) in AuM.

One particular feature of how Oakley operates is the
London-listed private equity trust, Oakley Capital Investments.
This was founded in 2007. Oakley Capital Investments’ money is
invested in the Oakley Capital funds; the returns from the funds
in turn drive the NAV – and the returns – of the OCI fund. The
listed entity has about 30 per cent invested in each fund. And
this is how ordinary shareholders, not just wealthy individuals
and institutions, can surf the private market wave.

The area of listed private equity trusts is relatively small and
not that well known, and yet it is a great way to access the
asset class, he said. 

“It is not straightforward attracting new capital into new
entities,” Tredget continued. 

It is essential that investors concerned about diversification
and returns consider private equity, he said. 

A look at hard numbers explains why investors cannot be shut out
of private markets. Firms are taking longer to list on the
stock market, and the ratio of privately held firms to listed
ones has shifted in favour of the former. In 2021, ALTSMARK, a US
software solution firm for the private capital sector, said
that more than a third of US registered investment advisors – to
take an example from the US – could be put out of business within
a decade if they didn’t include alternative assets in their
clients’ portfolios. Private market investments – such as private
equity and credit – have exploded 30-fold from 2000 to $30.5
trillion today. There are 414,791 global private market vehicles
compared with 43,342 listed firms on major exchanges worldwide –
a ratio of almost 10 to one. And a point to note is that
most private market investment vehicles require investors to put
up at least $1.0 million to enter the asset class. There have
been moves to try and widen access by using “tokenization”
and related technologies, for example.

“Misconceptions about private equity abound, but in reality, the
superior and sustainable returns private equity generates for its
investors, are realised through backing ambitious private
businesses and supporting them to achieve the next stage of their
growth.  As more and more companies eschew public markets,
choosing to forgo the expense, scrutiny and administrative burden
that entails, there is a dwindling pool of listed businesses in
which people can invest,” Tredget said.

“The ongoing shift to private markets means that it is
increasingly important for investors to achieve exposure to this
segment, if they want access to exciting high-growth businesses
favoured by private equity managers. Listed private equity trusts
have a vital role to play in this ‘democratisation’ of private
markets, allowing all investors direct access to the excellent
returns offered by leading private equity funds, with the added
benefit of liquidity which public markets offer,” he said. 

The mind-set

Oakley’s founders built the business to create the sort of
“financial partner they had always wanted when they were
entrepreneurs,” Tredget said. “We very much appeal to
business founders.”

Founders often reinvest in their business alongside Oakley,
attracted by the opportunity to partner with an investor who
understands entrepreneurs. Many also invest in Oakley’s funds for
the same reason, he said.

“In 80 per cent of our deals we are the first private equity
institutional capital going into these companies,” he said. 

Oakley often deals with complex businesses that may require
structuring and simplification and helps them become more
international, and so forth; their valuations can be very
attractive as a result. It focuses on three sectors: Technology,
consumer and education.

The average valuation of investments since inception is 9.5 times
earnings before interest, taxation, depreciation and
amortisation, with average growth per annum of 20 to 30 per
cent. In time the firms in which Oakley invests are sold, often
to trade buyers or larger private equity players such as KKR,
CVC, EQT, etc, he said. 

Some 70 per cent of the Oakley portfolio is in
digital-related business areas, such as digital marketplaces and
more than 75 per cent with subscriber-based, recurring revenues.

Since January, the tough economic environment has created
challenges, but there’s still plenty of opportunity. 

“We are still seeing companies that are growing in the high
teens…maybe some are operating into some performance headwinds,”
Tredget said.

The rise in the NAV of the OCI fund was 17 per cent, as of June
this year. This came after a “barnstorming” performance in 2021.
“That [performance] is one of the great advantages of being
focused,” he said. 

Tredget pointed out that several wealth managers are on the OCI
share register, tapping into the asset class via this listed
route. He cited examples such as Charles Stanley and Tilney [the
latter now called Evelyn Partners]. 

Oakley has so far raised five funds and is in the process of
raising its sixth.

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