Dear reader,
XLPE is an ETF that tracks the 25 most liquid global “Private Equity” companies. It is one of my two “6X” holdings in the OB25 for 25, that is to say it is an imaginary £6,000 out of an imaginary £35,000.
The ETF comes with a fee of 0.7% and the basis is that it enables access to the strategies of the world’s asset managers: Private Equity, Private Credit, Real Estate, Real Assets/Infrastructure.
Its performance to date for the OB25 for 25 has been -1.92%. Let’s consider what the leading minds believe for PE in 2H25 and then look at the 2Q25 updates and what results are ACTUALLY happening.
Outlook for Private Equity - Opinions
Opinion #1 PWC June 2025
A continued strong appetite for dealmaking… despite the recent market volatility and policy uncertainty. Profitable businesses with solid fundamentals and compelling sector tailwinds continue to attract investor interest, but dealmakers are showing greater selectivity and, at times, are opting to pause.
Some of the largest PE funds are making use of the uncertain US environment to expand internationally, including in Europe, as well as to plug vulnerabilities and reduce pressure points in their own operations and those of their portfolio companies.
Opinion #2 EY July 2025
Private equity exits reach a three-year high, as firms seize opportunities to turn strategic value creation into realised returns. In 1H25 liquidity events reached their highest levels in the last three years. Corporate acquirers became active buyers of private equity assets, with sponsors showing flexibility on valuations to help clear long-held portfolio companies. PE Firms announced 215 significant exit transactions in the first half of the year worth an aggregate US$308b – the most since the first half of 2022.
Opinion #3 M&G July 2025
Private Equity offers resilience in uncertain times. Private markets have not been immune to the effect of Trump’s tariffs. The current elevated levels of market uncertainty and investor apprehension is unhelpful for market confidence and deal flow. However it is at times such as these that the value of long-term patient capital, characterised by private markets, really comes to the fore.
Recent developments may prove positive for certain private market strategies. For instance, private credit may benefit as banks continue to pull back from riskier lending, extending the ongoing migration from traditional to private lenders and boosting both volumes and profit margins. Real estate is likely to continue to recover, albeit more slowly, supported by strong demand and limited supply.
Opinion #4 Goldman Sachs July 2025
Private equity pressures persist. Policy uncertainty and market volatility hindered private equity dealmaking in 1H 2025, shifting investor focus to a potential rebound later this year. Reduced exit activity is driving demand for liquidity solutions in secondary and credit markets. Valuations are on balance elevated for both entries and exits, and interest coverage ratios remain depressed despite a downtick in rates and refinancings. The potential for a “harder-for-longer” macro environment could extend holding periods or force general partners (GPs) to accept lower returns. Extended hold periods, combined with mounting pressure for GPs to return capital, has led GPs to explore alternative monetisation strategies, such as continuation vehicles and flexible, hybrid capital. On the other hand, we believe the complex environment creates both opportunities for transformational change—which, in our view, private equity is structurally set up to drive. GPs with strong value creation skills and disciplined deployment strategies are well-positioned to navigate these conditions.
Now on to a review of the largest XLPE Holdings, and particularly their 2Q25 updates:
#1 3i 9.45% of holdings
3I has its detractors who will never be persuaded to touch it due to its premium to NAV but then in its 1Q26 results to 30/06/25 pulls yet a further cat out of the bag with its largest holding “Action”, a chain of convenience stores across mainland Europe, delivering a 7% increase to NAV in the 3 months to June 25.
3i owns almost 58% of Action at a 18.5x trailing EBITDA.
This valuation multiple is based on the valuations attached to other discount retailers globally, including North American retailers, with 3i acknowledging that it uses a higher multiple than average to reflect Action’s better-than-average KPIs. Its most recent disclosure jusifies that.
Can 3i repeat its success with other holdings? No other holding is as large but it enjoys success with other holdings too.
#2 EQT 8.7% of holdings
In its half year report to 30/06/25 Swedish EQT delivers a strong performance with earnings up a third at EUR806m.
EUR806m in six months is 6X the run rate of 2019 delivered mainly through fees on the EUR141bn assets under management.
A further EUR100bn of funds is targeted to be raised taking EQT to circa EUR240bn. This is across a number of strategies. Its activism in Japan with a recent buy out of elevator manufacturer Fujitec for $2.7bn is notable. Fujitec traded at a >60% discount until fairly recently and got taken out at a 9% discount to assets.
EQT also disposed of EUR15bn of assets in 1H25 more than triple what it sold in 2024 although these were mainly trade sales and not IPOs.
#3 Ares Capital
On the 29th July Ares a $22.32 share, delivered a further NAV increase to $19.90 a share from $19.61 even after delivering a $1.96 a share dividend, so a 10% total return in 12 months.
This is 90% Private Credit loans to growing businesses with about 10% equity, mainly preference shares. Software, Health and Professional Services are nearly half of its clients.
#4 Ares Management
2Q25 results were a $0.46 EPS to shareholders up from $0.43 last year. Its AuM grew from $447bn to $572bn year to year although only $349.6bn is fee paying (FPAuM) but this is up 27% over the year.
So $220bn of follow on funds which will become fee paying which could generate $822m of incremental income. This could equate to a 15% boost to revenue and a 50% boost to profit based on EBITDA margins.
#5 Partners Group
Partners grew their AuM to $174.4bn in 1H25 to 30/06/25 across five strategies although actual earnings are released in the next two weeks.
This was despite markets muted by tariff uncertainty.
These are examples of deals it did ranging from Cat Food and BESS for natural-gas plants, to pharmaceutical royalties.
#6 KKR
KKR operates three segments: traditional asset management, an insurance arm and also owns 19 strategic companies.
KKR reported after-tax distributable earnings of $1.18 per share in 2Q25, up 10% year-over-year. Fee-related earnings grew from $823m to $887m between 1Q25 and 2Q25 while total operating earnings increased from $1.24 to $1.33 per share.
Conclusion
The top six all report solid results and these top six make up nearly 50% of the ETF. Their CY 2Q25 results reflect a very different story to the -1.92% drop in the stock market. Value continues to be created - at pace.
While the April Lib day caused XLPE to have a swerve (following its holdings down), further US rate cuts are all but assured in the coming months. The Big Beautiful Bill act is in place and the effect of Biden era spending is hitting the US economy. Moves are afoot in Japan to reform the stock market and several PE houses are the activists at the forefront there. There are several reasons to think the US has more “gas in the tank” and we all know that deals are being struck in Europe, particularly the UK. Rather than profit from holding UK firms being taken out at a premium what about backing the guy taking them out - why are they paying a premium? What upside do they see and expect, and are achieving?
XLPE is not solely a bet of the US, even if quite a number of the top 25 names are US listed. The 25 largest Private Equity houses invest across the globe chasing ideas, themes and strategies. XLPE is a bet of capital chasing ideas across the globe including to Japan and Europe. I remain of the view that a runway continues to exist for the large firms of the PE world, and this ETF accesses the largest 25 of those by market capitalisation to profit from their continued value generation.
Regards
The Oak Bloke.
Disclaimers:
This is not advice - you make your own investment decisions.
Micro cap and Nano cap holdings including those held in an ETF might have a higher risk and higher volatility than companies that are traditionally defined as "blue chip"
This one has been a disappointment, I must say. I'm down nearly 10% since buying on 14/02/25 for 12,669p. Still, not a catastrophe.
" “Action”, a chain of convenience stores in mainland Europe (mainly Holland) "
Mainly in Holland? Ridiculous statement. It started in Holland, I doubt it represents even 10% of stores.
I bought (3i) between £11 and £18. Starting at 20% discount to NAV.
Sold at £25 upto £41. A mistake I should have held onto at least half but it had turned ito 60% of my portfolio. Still no excuse for selling all.