Finding opportunity in Europe’s lower mid-market

Andrew Carnwath

Head of Private Equity, Fund Manager CT Private Equity Trust

Andrew Carnwath, Fund Manager of CT Private Equity Trust, explains why Europe’s lower mid-market remains an important hunting ground for experienced private equity investors — and why manager selection, operational value creation and valuation discipline are important.

Private equity is now an established part of many sophisticated investors’ portfolios. Over the long term, the asset class has become a way for investors to access companies, sectors and stages of growth that are not readily available through public markets.

However, private equity should not be seen as a single, uniform opportunity set. Outcomes can vary significantly by manager, strategy and vintage. Teams change, funds grow and market conditions evolve. For investors, that means access and manager selection matter.

At CT Private Equity Trust, we have been investing in private equity for more than 27 years. Over that period, we have built relationships with established managers while also constantly seeking to identify high-quality emerging managers before they become widely known. In our view, that combination of experience, network and selectivity is important in identifying attractive opportunities and managing risk.

Private equity is not a single, uniform asset class. Outcomes can vary significantly, which makes access, experience and manager selection critical.

One area we continue to find compelling is the European lower mid-market. Investing in established, profitable small and mid-sized companies, valued at up to around £500 million at the point of investment. Many are founder-led or family-owned businesses with proven products, experienced management teams and a proven record of growth.

This part of the market is less efficient and less heavily intermediated than larger buyout markets. The best opportunities are often not won through competitive auctions. Instead they can be secured through local relationships, sector knowledge and building trusted relationships with management teams looking for the right partner – not simply the highest bidder.

We focus on primary buyouts: along with our investment partners being the first private equity investor in a business and then supporting growth through investment in people and systems, digital enhancement, commercial strategy, international expansion and selective acquisitions. While no approach can remove risk, we believe operational improvement is a more durable source of value creation than relying on leverage or rising valuation multiples.

In our view, the most attractive private equity opportunities are where capital, relationships and operational expertise can help good businesses become great businesses.

Europe remains a particularly interesting region. It is fragmented, localised and less penetrated by private equity than North America. That fragmentation can create complexity, but it can also create opportunity for managers with local relationships, sector knowledge and the ability to support businesses through their next phase of growth. It also has many established private businesses and a strong track record of innovation in high growth sectors. CT Private Equity Trust has long focused on this part of the market, with more than 80% of the portfolio invested in the UK and Europe.

Private equity can provide exposure to themes and business models that are difficult to access in listed markets. Cyberhawk, for example, uses drone technology to inspect critical energy infrastructure, while GT Medical has developed a bioabsorbable radiation therapy designed for use following brain surgery in cancer patients.

Exit markets have been more subdued in recent years, reflecting higher interest rates, geopolitical uncertainty and a more cautious transaction environment. That has affected liquidity across the market. However, we continue to see strong demand for well-run private businesses with leading positions in attractive niches. A further attraction of investing in small and mid-sized companies is that there is a broader pool of potential acquirers than for larger private companies.

For shareholders in listed private equity investment trusts, discounts to net asset value are another consideration. Discounts can persist and may widen as well as narrow, so they should not be viewed as a guaranteed source of return. However, where a portfolio is valued on a disciplined basis and continues to generate exits at or above carrying value, we believe discounts may present long-term investors with an interesting entry point. For those who reinvest dividends, buying shares at a discount to NAV can also add to long-term compounding of returns, although this outcome is not guaranteed.

CT Private Equity Trust aims to provide shareholders with a regular quarterly dividend of at least 4% of net asset value each year. Dividends are not guaranteed and the value of investments can fall as well as rise. But for investors who understand the risks and take a long-term view, we believe private equity investment trusts offer a liquid and accessible way to access an asset class that has historically been difficult for many individuals to invest in directly.

Important information: information is correct as of date of publication. Information from external sources is considered reliable but there is no guarantee as to its accuracy or completeness.

Investment risks

The value of your investments and any income from them can go down as well as up and you may not get back the original amount invested. Gearing is used for investment purposes to obtain, increase or reduce exposure to an asset, index or investment. The use of gearing can enhance returns to investors in a rising market, but if the market falls the losses may be greater.

Issued by Columbia Threadneedle Management Limited and approved for distribution 19/10/2026.

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About CT Private Equity Trust

Private equity: finding opportunity in Europe’s lower mid-market

Andrew Carnwath, Fund Manager of CT Private Equity Trust, explains why Europe’s lower mid-market remains an important hunting ground for experienced private equity investors — and why manager selection, operational value creation and valuation discipline are important.

Private equity is not a single, uniform asset class. Outcomes can vary significantly, which makes access, experience and manager selection critical.

In our view, the most attractive private equity opportunities are where capital, relationships and operational expertise can help good businesses become great businesses.

Investment risks

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