Key Takeaways
- • Peel Hunt research analysts Anthony Leatham and Markuz Jaffe identified HG Capital, Ruffer, and Capital Gearing as top-performing alternative investment trusts for growth-oriented investors seeking capital appreciation rather than income.
- • Alternative investment trusts now manage approximately £111 billion in assets under management, with £56 billion allocated to high-yield trusts (>3% yield) and £55 billion in lower-yield trusts (<3% yield) focused on risk-adjusted returns.
- • HG Capital delivered top-quartile returns over three, five, and ten-year periods through concentrated exposure to unlisted software businesses across defined clusters including tax and accounting (31% of NAV), payroll (23%), legal (10%), tech services (8%), and healthcare (9%).
- • Private equity valuations face potential headwinds if inflationary pressure persists, mirroring recent valuation compression experienced by listed technology companies, representing a key risk factor for alternative trust investors.
- • Peel Hunt's analysis focuses on alternative investments defined as trusts that do not purchase traditional equities, with particular emphasis on those generating strong risk-adjusted returns through unlisted company exposure or diversified asset class strategies.
Summary
Peel Hunt's research team has identified a subset of alternative investment trusts positioned to deliver growth for institutional investors and family offices that do not require portfolio income. According to analysts Anthony Leatham and Markuz Jaffe, the sector—defined as trusts avoiding traditional equity exposure—has grown substantially, now representing £111 billion in assets under management across the UK market.
The alternative investment universe divides into two distinct segments by yield profile. Approximately £56 billion is allocated to higher-yielding trusts producing more than 3% annual returns, while the remaining £55 billion resides in lower-yield trusts (<3%) designed to generate risk-adjusted capital appreciation through alternative strategies. Peel Hunt's analysis prioritizes the latter category, examining trusts capable of delivering strong absolute returns despite modest income generation.
HG Capital emerges as the primary private equity recommendation, demonstrating consistent top-quartile performance across three-, five-, and ten-year measurement periods. The trust's investment thesis concentrates on unlisted software businesses organized into defined sector clusters: tax and accounting software represents the largest allocation at 31% of net asset value, followed by payroll (23%), legal services (10%), healthcare (9%), and tech services (8%). Peel Hunt analysts expressed confidence in HG Capital's domain expertise and its established market position as a trusted partner to unquoted software companies, though they flagged emerging valuation risk. Should inflationary pressures persist, private equity valuations could face similar downward pressure as listed technology equities have recently experienced, representing a material consideration for prospective investors.
The research identifies alternative investment trusts as an increasingly mainstream institutional holding, though the sector remains differentiated from traditional equity and bond allocations. Ruffer and Capital Gearing were cited alongside HG Capital as representative options within the recommended cohort, though detailed analysis of these vehicles was not provided in the initial research summary.
The alternative investment universe divides into two distinct segments by yield profile. Approximately £56 billion is allocated to higher-yielding trusts producing more than 3% annual returns, while the remaining £55 billion resides in lower-yield trusts (<3%) designed to generate risk-adjusted capital appreciation through alternative strategies. Peel Hunt's analysis prioritizes the latter category, examining trusts capable of delivering strong absolute returns despite modest income generation.
HG Capital emerges as the primary private equity recommendation, demonstrating consistent top-quartile performance across three-, five-, and ten-year measurement periods. The trust's investment thesis concentrates on unlisted software businesses organized into defined sector clusters: tax and accounting software represents the largest allocation at 31% of net asset value, followed by payroll (23%), legal services (10%), healthcare (9%), and tech services (8%). Peel Hunt analysts expressed confidence in HG Capital's domain expertise and its established market position as a trusted partner to unquoted software companies, though they flagged emerging valuation risk. Should inflationary pressures persist, private equity valuations could face similar downward pressure as listed technology equities have recently experienced, representing a material consideration for prospective investors.
The research identifies alternative investment trusts as an increasingly mainstream institutional holding, though the sector remains differentiated from traditional equity and bond allocations. Ruffer and Capital Gearing were cited alongside HG Capital as representative options within the recommended cohort, though detailed analysis of these vehicles was not provided in the initial research summary.
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