Bridgepoint looks to interest rates for recovery

Private equity fund manager Bridgepoint Group (BPT) has spent most of the past three years not living up to the promise of its initial public offering in July 2021. The share price remains well under the 350p listing level, and well off its all time high of 561p, and we can describe it as emblematic of an unsustainable low interest rate boom. Furthermore, since interest rates started climbing, life for Bridgepoint and private equity in general, has become far more complicated.

Whether the company’s operational performance deserves such critical scrutiny is open to question as cash through the door, in the form of management fees, has been quite solid. Management and other fees were up by 9.9 per cent to £265mn, which was due to an increase of 6.6 per cent in total assets under management to €40.5bn (£35bn).

During the year, Bridgepoint made 13 platform investments through its private equity arm, deploying €2.7bn in total. The BE VII fund committed €1.7bn to five acquisitions and has now deployed a third of its primary capital.

Bridgepoint’s other direct lending business had a decent year and deployed €1.3bn of capital, with its funds generating a gross cash yield of 10 per cent, with no reported losses in the portfolio.

Numis currently values Bridgepoint at a price/earnings ratio of 16 for 2024, with a dividend yield of 4 per cent. There may be some signs of a recovery in private equity, but interest rates are still the determining factor for the shares this year, with predictions on a cut moving ever further into the future. Overall, not bad operationally, but still a bubble share. Hold.

Last IC view: Sell, 505p, 19 Aug 2021