Schroder British Opportunities Trust has announced its financial results for the year ended 31 March 2025, alongside a strategic pivot that would see the listed investment vehicle narrow its focus exclusively to private equity, a move the board believes offers more compelling long-term returns.
The trust, which currently operates a hybrid portfolio of private and public equity, reported a modest increase in net asset value (NAV) per share of 0.5% for the financial year, bringing cumulative returns since inception in 2020 to 11.2%.
While public holdings remained broadly flat — contributing just 0.12% to NAV — private investments saw a fair value gain of £0.5 million, with the portfolio now valued at 1.5 times original cost.
In response to the evolving market landscape, the investment trust’s board has proposed two key resolutions for shareholder approval: an amendment to the company’s investment objective and policy, shifting to a fully private equity strategy; and an acceleration of the next continuation vote from early 2028 to early 2027.
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Chair Justin Ward emphasised the rationale behind the decision: “With the majority of capital now deployed across a well-diversified portfolio, we are entering a phase where asset maturity and company performance will increasingly drive realisation opportunities and long-term returns.”
“Robust pipeline of opportunities”
At the same time, Ward said, the portfolio managers continue to identify “a robust pipeline of opportunities in the UK private equity market” and the board’s proposals to amend the investment policy to focus exclusively on private equity investments will allow shareholders to take advantage of this through the unique access to Schroders Capital deal flow that the investment company provides.
At year-end, the trust’s portfolio comprised 10 private companies accounting for 71.7% of NAV, 20 publicly listed firms making up 18.9%, and cash or net liabilities of £9.0 million (9.4% of NAV). The top 10 holdings represented 79.3% of total investments.
Private equity tilt
The company’s private equity tilt, focusing on growth capital and buyout opportunities rather than venture capital or pre-IPO risk, proved a source of resilience amid a turbulent macroeconomic environment.
UK markets were roiled over the past year by political change, as a new Labour government introduced policies — including higher employer national insurance contributions and an increased minimum wage — that rattled business confidence. The backdrop contributed to continued underperformance in small- and mid-cap stocks, sectors where the trust’s public equity investments are concentrated.
Global market sentiment, too, saw swings. Initial bullishness following Donald Trump’s re-election in the US gave way to concerns over renewed trade tariffs and geopolitical instability, compounding volatility in UK equities.
In contrast, private holdings, mainly UK-based software and services companies, demonstrated higher revenue growth and stronger operational margins compared to listed peers. While early 2024 was marked by subdued private equity activity, the latter half of the year saw renewed investor engagement and deal flow, buoyed by improved inflation data and greater political clarity.
The trust’s valuation process remains a point of differentiation. Led by Professor Tim Jenkinson, a non-executive director and expert in private equity valuation, the approach leverages an independent Schroders team separate from the portfolio managers. This group applies rigorous scrutiny, benchmarking portfolio companies against public market comparables and reporting directly to the board.
As the trust positions itself as a dedicated private equity vehicle, the board and managers are confident that investors will benefit from focused exposure to UK mid-market opportunities at a time when public markets remain unsettled.
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