Oakley Capital Investments (LON:OCI): AI-Driven Growth and a Compelling NAV Discount Opportunity

The global shift toward artificial intelligence (AI) and advanced technologies has created fertile ground for investors willing to identify undervalued assets positioned at the intersection of innovation and resilience. Among such opportunities, Oakley Capital Investments (LON:OCI) stands out. With a 29.58% discount to its NAV as of June 2025 and a strategic focus on AI-enabled ventures, OCI presents a rare combination of near-term valuation upside and long-term growth potential. Let's dissect the case for this London-listed investment trust.

The Attractive NAV Discount: A Catalyst for Shareholder Value

OCI's shares trade at 498 pence, far below its estimated NAV of 705.74 pence—a discount that has widened to historic levels. This divergence creates a compelling entry point for investors, as the discount is now well above its five-year average of 20%.

The trust's decision to halt dividends and introduce a £20m annual share buyback program in 2025 marks a strategic pivot to address the discount. By repurchasing undervalued shares, OCI aims to align its market price with its underlying asset value. Additionally, its £213m liquidity buffer (cash and undrawn facilities) provides flexibility to capitalize on opportunities while navigating volatility.

AI Investments Powering Future Growth: The Touring I Venture Fund's Role

OCI's Touring I Venture Fund, a £100m commitment within its £238m tech-focused portfolio, is a linchpin of its growth strategy. The fund targets Series B and C-stage enterprise software firms leveraging generative AI, with a focus on cybersecurity and data analytics. Key highlights include:

1. I-TRACING (Cybersecurity):
   A French leader in managed detection and response services, I-TRACING has grown revenue by 30% annually, fueled by AI-driven threat detection tools. Its expansion into international markets positions it as a key beneficiary of rising cyber risks.

2. Bridewell (Cybersecurity Services):
   OCI's planned £25m investment in Bridewell, part of a partnership with I-TRACING, aims to create a European cybersecurity champion. This deal exemplifies OCI's ability to leverage operational expertise to scale disruptive technologies.

3. Konzept & Marketing (Insurance Tech):
   A German insurance MGA acquired by Oakley Capital Fund V, this firm integrates AI into underwriting and risk assessment. Its buy-and-build strategy targets a fragmented market, promising operational synergies and margin expansion.

The Touring I Fund's £47m fair value as of 2024 (up from £5.1m in 2022) underscores its early-stage success. With five of its 2024 investments in technology sectors, the fund is well-positioned to capitalize on AI's transformative potential across industries.

Strategic Shifts and Financial Prudence: Navigating Challenges

OCI's leadership has not shied from hard decisions. Ending dividends and prioritizing buybacks reflects a focus on capital efficiency at a time when the NAV discount exceeds 29%. Meanwhile, the trust's diversified portfolio—spanning tech, education, and infrastructure—buffers against sector-specific risks.

Key strengths include:
- Operational Partnerships: 72% of deals are founder-led, ensuring alignment with strategic goals.
- ESG Integration: Cybersecurity investments enhance data protection, aligning with ESG mandates.
- Portfolio Maturity: A younger NAV (40% deployed in two years) suggests upcoming valuation uplifts as companies scale.

Risks and Considerations

No investment is without risks. OCI faces:
- Macroeconomic Volatility: U.S. trade policies could impact ~2% of portfolio revenues, though most businesses are Europe-focused.
- Valuation Realization: While the NAV discount is wide, narrowing it depends on market sentiment and OCI's execution of buybacks.
- Tech Execution: AI's promise hinges on portfolio companies delivering on operational and revenue targets.

Investment Thesis: A Multifaceted Opportunity

Why OCI is worth considering now:
1. NAV Discount Compression: A 29.58% discount offers asymmetric upside. Even a partial narrowing to 20% would add ~£120m to OCI's market cap.
2. AI-Driven Growth Pipeline: The Touring I Fund's focus on cybersecurity and enterprise software aligns with secular tech trends.
3. Liquidity and Flexibility: OCI's cash reserves and buybacks provide a cushion for opportunistic investing.

Actionable advice for investors:
- Buy the dip: OCI's valuation is compelling for long-term holders.
- Monitor buybacks: Track the impact of share repurchases on the discount.
- Watch for NAV upgrades: Positive catalysts, such as Bridewell's completion or I-TRACING's international expansion, could drive revaluation.

Conclusion: A Trust Worthy of Attention

Oakley Capital Investments offers a rare blend of undervaluation and strategic foresight. Its AI-focused investments, coupled with a disciplined capital allocation strategy, position it to thrive in a tech-driven economy. For investors seeking exposure to transformative technologies without overpaying, OCI's NAV discount creates an attractive entry point.

In a world where AI is reshaping industries, OCI's portfolio is not just a collection of companies—it's a roadmap to the future. The question now is whether the market will catch up.

Disclosure: This analysis is for informational purposes only. Investors should conduct their own research or consult a financial advisor before making decisions.