Patria Private Equity Trust: NAV Resilience in a Volatile Market – A Compelling Buy at 29.7% Discount

In a world where geopolitical tensions, currency volatility, and PE market stagnation have become the norm, Patria Private Equity Trust (PPET) stands out as a rare gem of consistency. With a 14% annual NAV growth rate over the past decade, a £372.6m liquidity buffer, and a 29.7% discount to NAV, this trust offers investors a chance to buy high-quality private equity exposure at a steep discount. Let's dissect why now could be the perfect time to act.

NAV Resilience Amid Market Headwinds

The first half of 2025 has been rocky for private equity. Geopolitical risks—particularly U.S. tariff policies and delayed rate cuts—have slowed transaction volumes, pushing valuations into a holding pattern. PPET's H1 NAV total return of 2.6% reflects this environment, but the long-term picture remains robust. Over 10 years, PPET has delivered a 1,050% total NAV return, far outpacing the FTSE All-Share Index's 277% gain. This resilience is no accident.

The trust's lower mid-market focus (funds with £250m–£750m targets) is key. Smaller funds often see faster exits and less competition, making them less prone to valuation drags. PPET's portfolio includes stakes in funds like Hg Mercury 4 (technology) and IK X (industrial sectors), which have demonstrated strong exit pipelines. For instance, recent realized gains from exits like Summit Spine & Joint Centers (healthcare) and RENK Group AG (engineering) contributed £6.8m to H1 distributions.

The Liquidity Advantage: A Cushion for Opportunistic Buying

PPET's £372.6m liquidity buffer (as of April 2025) is a strategic masterstroke. This includes:
- £19.1m in cash.
- £257.8m undrawn from a £400m credit facility.
- £95.7m deferred consideration from a secondary sale due by September 2025.

This liquidity allows PPET to:
1. Seize undervalued opportunities as markets consolidate.
2. Mitigate overcommitment risks: Its 30% overcommitment ratio (vs. a 30–65% target range) ensures flexibility.
3. Continue buybacks: Having spent £22.6m on repurchases since 2024, PPET aims to narrow its steep discount. A recent April buyback of 510,000 shares reduced dilution and boosted NAV per share.

The Discount-to-NAV Catalyst: A 29.7% Margin of Safety

At 29.7% below NAV, PPET offers a rare margin of safety. Historically, the discount has averaged 20–25%, making the current level a potential buying floor. The Edison Investment Research report (July 2025) noted that this discount could narrow as:
- Buybacks resume post-current program completion.
- Portfolio maturations (half the portfolio held for ≥4 years) drive exits. With ~$1.2 trillion in global PE “dry powder,” a market rebound could accelerate valuations.

Dividend Growth: Stability in a Volatile World

PPET's £17.6m annual dividend per share (a 5% increase over 2024) is no small feat. This marks its 11th consecutive year of dividend growth, earning it the AIC's “next-generation dividend hero” title. With a 3.2% yield, the dividend provides ballast during market dips. Crucially, the payout is sustainable: H1 distributions of £8.0m comfortably covered the £6.7m interim dividend.

Strategic Focus: Lower Mid-Market Funds with Clear Exit Pipelines

PPET's investment strategy is laser-focused on lower mid-market funds, which combine the scalability of mid-market deals with the agility of smaller funds. Recent commitments include:
- €30m to Latour Small Cap I (French mid-market buyouts).
- €14m alongside AgilaCapital (technology co-investments).

These funds target sectors like healthcare, industrials, and tech—areas with strong long-term demand. With ~40% of its portfolio in funds aged 4+ years, PPET is primed for exits as these mature.

The Case for Immediate Investment

The stars are aligning for PPET:
1. Discounted entry point: A 29.7% NAV discount offers a safety net.
2. Liquidity-driven flexibility: PPET can capitalize on cheap opportunities as markets stabilize.
3. Dividend reliability: A 3.2% yield with 11 years of growth.
4. Long-term track record: 14% annual NAV growth over a decade.

Risks to Consider

• PE market stagnation: If geopolitical risks delay exits further, NAV growth could slow.
• Currency headwinds: A strong pound could hurt dollar-denominated returns.
• Buyback execution: Success depends on management's timing and scale.

Conclusion: A Rare Opportunity in a Discounted Private Equity Vehicle

PPET isn't just a trust—it's a liquidity-backed, dividend-paying machine with a proven ability to navigate turbulence. At a 29.7% discount, investors get access to a 14% annual NAV growth engine with ~£370m in dry powder to exploit undervalued assets. The combination of buybacks, dividend stability, and maturing exit pipelines makes this a compelling buy for patient investors.

Recommendation: Consider a core holding in PPET for its income and long-term NAV upside. Monitor for signs of PE market recovery and further buybacks to optimize entry points.

Investment Thesis: Buy PPET at the 29.7% discount. Hold for 3–5 years to capture NAV growth and dividend compounding.