In the current landscape of market uncertainty and shifting investor sentiment, listed private equity (PE) trusts find themselves at a critical juncture. These vehicles, once viewed as stable gateways for investors to tap into the high-return potential of private markets, are now grappling with a series of challenges that have significantly dented demand and valuations.
A confluence of factors—including macroeconomic headwinds, higher interest rates, and a general retreat from riskier assets—has created what some industry leaders are calling a “perfect storm of negativity” as Private Equity International reports. The result: a wave of capital outflows, widening discounts to net asset values (NAVs), and growing vulnerability to shareholder activism and market disruption from new players.
Deepening Discounts and Dampened Demand
Over the past two years, listed PE trusts have seen their market prices trade at steep discounts to their NAVs. For example, Pantheon International (PIP), a well-regarded FTSE 250 PE investment trust, has watched its discount widen to around 45%—a stark contrast to the 15% level it maintained in early 2022. This trend is not isolated; many trusts are facing similar valuation pressures, creating frustration among shareholders and uncertainty among prospective investors.
This declining investor interest stems from broader concerns about illiquidity, fee structures, and perceived opacity in the underlying assets of private equity portfolios. Additionally, the rising interest rate environment has shifted preferences toward more liquid, yield-generating instruments, further weakening demand for these traditionally long-term holdings.
Strategies to Regain Investor Confidence
In response, listed PE trusts are undertaking proactive measures to stabilize their share prices and restore investor trust. One of the most common responses has been the implementation of share buyback programs. By repurchasing shares, these trusts aim to reduce the supply in the market, narrow the discount to NAV, and signal confidence in their long-term value.
Pantheon International, for instance, launched a £200 million share buyback plan as part of a broader investor engagement strategy. Simultaneously, the trust brought on new non-executive directors to its board—an effort to introduce fresh perspectives and reassure stakeholders of its commitment to governance and transparency.
Others are turning to more aggressive investor outreach, reworking marketing strategies to target a wider range of stakeholders, including retail investors. These campaigns aim to educate potential investors on the value proposition of listed PE trusts and the stability offered by their diversified portfolios of private market assets.
A Rise in Shareholder Activism
The vulnerability of PE trusts in this volatile climate has not gone unnoticed by activist investors. Global activist campaigns surged in 2024, reaching their highest level in six years, according to Barclays. Nearly 600 U.S.-listed companies faced activist demands—an increase of 7% year-over-year—with a notable uptick in first-time activist interventions.
In the UK, Saba Capital, led by Boaz Weinstein, has emerged as a leading activist force, acquiring stakes in several listed investment trusts and pushing for fundamental changes. Saba’s campaigns often focus on converting closed-end funds into open-ended structures, thereby allowing shareholders to exit at NAV rather than selling at a discount. While these moves have been met with resistance from some trust boards, they underscore the increasing pressure for structural reform within the sector.
Competing for a New Investor Base
Beyond activism, PE firms are facing competition from a growing array of alternative products tailored to retail and high-net-worth investors. Recognizing the need to expand their appeal, firms such as KKR and Capital Group have introduced hybrid funds that blend public market exposure with private market assets. These vehicles offer lower minimum investments and greater liquidity—addressing two key concerns that have long hindered broader adoption of private equity strategies.
The rise of “semi-liquid” funds is particularly notable. These structures offer periodic redemption windows, providing investors with more flexibility than traditional closed-end PE funds. They have gained traction among wealth managers and affluent individuals who seek exposure to long-duration, growth-oriented assets like private tech and infrastructure—without locking up capital for a decade or more.
Challenges Ahead, But Innovation Brewing
While the road ahead remains challenging, the response from listed private equity trusts reveals a sector unwilling to stand still. The combination of tactical share buybacks, governance reforms, and product innovation reflects a strategic pivot designed to realign investor expectations and rebuild momentum.
Yet the success of these initiatives will ultimately depend on the market’s willingness to look beyond short-term volatility and recognize the long-term value these trusts can offer. If they can balance liquidity, transparency, and performance, listed PE trusts may not only weather this storm—but emerge stronger and more resilient than before.
