3i asset values lag market surge

By Simon Meads

LONDON (Reuters) - Private equity firm 3i Group (III.L) said asset values increased just 2 percent in the first half of its financial year as the real economy failed to keep up with rebounding stock markets.

Its shares led the list of blue-chip fallers, down as much as 6.5 percent, after it said net asset value per share (NAV) increased to 286 pence at the end of September from 279 pence end-March, towards the bottom of analysts' expectations.

"It is difficult to see what will drive the NAV in the short term; realisations are likely to be low for some time, with activity levels in the private equity market only slowly picking up," said Cazenove analyst Chris Brown in a note.

Cazenove said it was likely to adjust its new NAV target for 3i to 276 pence a share, down from 307 pence.

3i had been hoping to report clear evidence of an upturn, but has only seen clear signs of recovery in India and China.

"In a European context we are seeing that things have stabilised and a number of sectors are seeing positive earnings momentum; in Asia we are seeing positive earnings momentum," said Michael Queen, chief executive since the start of the year.

But any improvements would not filter through to valuations until March next year at the earliest, he told reporters on a conference call, with performance typically lagging behind as it used cautious methods to value its portfolio.

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