Investors are overlooking opportunities in the listed private equity sector, according to Gresham House chief executive Tony Dalwood.

The average private equity investment trust is trading on a 15.5% discount to net asset value (NAV), according to the Association of Investment Companies. Well-known trusts such as Jon Moulton’s Better Capital 2012 are trading on even higher discounts at 30.8%, with Candover at 47.4% and Aberdeen Private Equity at 25.6%.

Dalwood is not put off by this and suggests there is scope for active investors to make money and bring about change in the sector. They can do this by exploiting the pricing differential between the public and private equity markets, he said.

‘Listed private equity is quite an inefficient sub-sector,’ he said, pointing to the broad lack of research coverage among the buy and sell sides.

‘You end up with a sub-sector that is not covered well, which creates inefficiencies and low liquidity.’

Dalwood points out that the European-listed private equity sector accounts for some €100 billion (£71.3 billion) in assets and includes vehicles that are overlooked and sub-scale, offering opportunities to bring about positive change.

‘Are there vehicles that should remain listed? If they remain listed should they be of greater scale? It could be that we help management teams to address these issues,’ he said.

The secondary market currently offers opportunities, given the significant difference between public and private markets, he added.

‘If you look at the market for secondary private equity assets, they are trading at 90-100p in the pound, close to NAV. In the listed private equity world, a lot of secondaries are trading at a 30% discount to NAV, so you have quite an opportunity there,’ he said.

Listed private equity is firmly on the radar for Gresham House, a 158-year-old trust that SVG founder Dalwood, Christows founder Michael Phillips and ex-Schroder Private Banking chief Rupert Robinson have transformed into an asset management business. Their multi-faceted approach aims to capitalise on growing investor demand for illiquid and real assets.

Alongside listed private equity, Gresham House will back direct private equity opportunities that are cash-generative, where there is a minimum target internal rate of return of 15%.

The group will also seek to become the third party distributor of choice for specialist asset managers, acquiring businesses where they believe they can add value to distribution or product development.

Gresham House also plans to buy public equities and real assets that look cheap. To give wealthy individuals, private offices and endowments access to illiquid investment opportunities, it plans to develop a co-investment platform.

This will provide access to the firm’s investment reports and proprietary research, co-investment opportunities and details, alongside portfolio management capability of the illiquid assets for clients.