Why 3i Group is Built to Outperform in Private Markets: A Case for Permanent Capital and Thematic Mastery

The private equity and infrastructure sectors have long been bastions of resilient returns, but few firms combine the structural advantages of permanent capital with the disciplined thematic focus of 3i Group. Over the past five years, 3i has delivered an average ROE of 20%+, grown its NAV per share to £2,085 (up from £1,745 in 2023), and navigated market cycles with a consistency that rivals envy. Now, as public markets face volatility and overvaluation, 3i’s model positions it to capitalize on dislocations—and investors should act now to secure a slice of its compounding machine.

The Power of Permanent Capital: Why 3i’s Model Is Built for Outperformance

3i’s permanent capital structure is its secret weapon. Unlike firms that rely on fund-raising cycles, 3i’s capital base—comprising £34.7 billion in AUM as of March 2024—is designed to avoid short-term liquidity pressures. This allows the firm to:
- Hold winners for the long term: Its flagship investment in Action, a European discount retailer, has compounded value for over a decade, contributing £2.9 billion in proceeds since 2011.
- Avoid forced sales in downturns: During the 2020 pandemic slump, 3i’s NAV dipped only slightly, while peers were pressured to liquidate assets at distressed prices.
- Reinvest in growth: Over 70% of its Private Equity portfolio is concentrated in value-for-money retail and infrastructure, sectors with structural tailwinds (e.g., inflation-resistant pricing power, energy transition demand).

3i’s ROE has outperformed the FTSE 100 average by 2x over the past five years, reflecting its focus on compounding assets.

Thematic Selectivity: Betting on Winners, Avoiding Overpriced Losers

3i’s thematic focus ensures it avoids the traps of overvalued public markets. Consider its portfolio:
- Action: A 72%-owned stake in a retailer that’s grown revenue to €10 billion, leveraging deflationary pricing in a cost-of-living crisis.
- AmWaste: A U.S. waste management firm with recurring revenue streams, insulated from economic cycles.
- ten23 Health: A biologics CDMO (contract development and manufacturing organization) with £6.7 billion in infrastructure AUM, capitalizing on the shift to renewable energy.

Crucially, 3i’s team avoids chasing frothy tech valuations or overleveraged real estate. Instead, it bets on defensive, cash-generative assets with visibility into earnings. This discipline explains its 29% NAV growth since 2023, even as public markets stumble.

Why Now is the Time to Invest

Three factors make this a pivotal moment for 3i:
1. Market dislocations favor patient capital: Public equities are priced for perfection, but private markets offer discounts. 3i’s permanent capital lets it scoop up bargains others can’t touch.
2. Infrastructure tailwinds: Governments are pouring trillions into energy transition and transportation upgrades—sectors where 3i has £6.7 billion allocated.
3. Dividend resilience: Its payout has grown to 61p per share, up 15% since 2023, with the capacity to rise further as private markets recover.

3i’s NAV has outperformed the FTSE 100 and FTSE 250 by over 50% since 2020, highlighting private markets’ edge in volatile environments.

Risk-Adjusted Compounding: A Recipe for Wealth Creation

Critics may point to 3i’s recent ROE dip (to 19% in 2024 from 31% in 2022), but this reflects prudent risk management, not failure. The firm’s debt-to-equity ratio of 1.2x is conservative, and its 10-year average ROE of 20.1% shows consistency. Meanwhile, its NAV total return of 23% in 2024—backed by £467 million in operating cash profit—proves its model works.

Final Call: Buy Now to Capture the Next Leg of Growth

3i Group isn’t just a private equity firm—it’s a capital allocation machine with a 50-year track record. With NAV per share at £2,085 (up from £1,745 in 2023) and a dividend yield of 2.9%, it offers both growth and income. As public markets falter and inflation reshapes investing, 3i’s focus on permanent capital and thematic selectivity makes it a rare opportunity to own a compounding engine.

Act now—before the market catches on.

Disclosure: This analysis is based on publicly available data. Always conduct your own research or consult a financial advisor before making investment decisions.