HgCapital Trust

(HGT) 520p

Gain to date: 13.2%

Private equity investment trust HgCapital (HGT) has continued to put in a robust performance since we said last March that it can add growth and value to your portfolio.

The businesses it invests in provide software and services ranging from tax, accounting and payrolls to factory automation, fintech, insurance, healthcare and crisis and incident management. This side of tech may not be as optically exciting as areas like AI and the metaverse but it is absolutely crucial to the day-to-day running of most 21st century businesses. 

WHAT HAS HAPPENED SINCE WE SAID TO BUY?

The trust recently delivered an upbeat fourth quarter trading update (3 February) driven by a strong portfolio operating performance.

HgCapital has a spread of around 50 unquoted investments across the software and service sector with the top 20 making up roughly 75% of total assets by value.

The trust reported a 31 December NAV (net asset value) of 544.1p, up 4.4% and generated a total share price return of 25.7%.

The company has chalked up an impressive string of new and follow-on investments in 2024 totalling £601 million.

WHAT SHOULD INVESTORS DO NOW?

We are positive about HgCapital and while its shares have re-rated from a 13% discount to 2% premium we still think it could be a useful option as part of diversified portfolio.

Iain Scouller, analyst at Stifel, adds a note of caution about the trust. He says that the ‘share price tends to be quite sensitive to the tech/growth stock listed and any sell-off in [that area]’.

Ultimately the trust knows what it is good at and will continue to focus on companies within the end-market, mission-critical software, and services ‘clusters’ which it has tracked for years. For us that justifies the ongoing charges of 1.7%. 

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