HgCapital Trust Q1 2026 results: strong portfolio trading, weaker valuations
HgCapital Trust has opened 2026 with a mixed set of numbers. The underlying portfolio of private, unquoted technology and services businesses kept growing nicely, but the market slapped lower valuation multiples on software assets, and that dragged net asset value lower.
The headline figure is a 5.4% fall in NAV per share total return in the first quarter, leaving NAV per share at £5.28. Net assets stood at £2.4 billion. That is not the sort of quarter investors want to see, but the reason matters here – this was mainly a valuation reset rather than an operational wobble.
| Key Q1 2026 number | Value | Why it matters |
|---|---|---|
| NAV per share | £5.28 | Down after lower valuation multiples hit the portfolio |
| NAV per share total return | -5.4% | Shows the overall value movement in the quarter |
| Share price | £3.88 | Market reaction has been much harsher than the NAV move |
| Share price total return | -22.9% | Big sell-off year-to-date |
| LTM revenue growth | 16% | Last twelve months sales growth across the portfolio remains strong |
| LTM EBITDA growth | 19% | Profit growth is still ahead of revenue growth |
| EBITDA margin | 34% | Healthy profitability for a software-heavy portfolio |
| Investments made | £42 million | Fresh capital deployed in Q1 |
| Realisation proceeds | £91 million | Cash returned from exits exceeded new investment |
Why HgCapital Trust NAV fell despite 16% revenue growth and 19% EBITDA growth
The central message from this update is simple: trading was good, valuations were bad. HgT says a material contraction in valuation multiples reduced the value of the portfolio by 9%, while positive trading contributed 5%. Put those together and the portfolio still ends up lower.
That matters because HgT owns private companies, and private company valuations are often influenced by public market comparisons. When listed software stocks get marked down, private market valuations usually follow to some degree. HgT says that is exactly what happened in Q1.
The weighted average EV/LTM EBITDA multiple – that is enterprise value divided by last twelve months EBITDA, a common way of valuing companies – fell to 24.0x at 31 March 2026. That was down from 25.2x at the start of 2026 and 26.1x at the start of 2025.
In plain English, the market decided software businesses are worth a bit less for each pound of profit than they were before. Even if those businesses continue to grow, a lower multiple can still push valuations down.
AI fears and software sell-offs are hitting HgT, but the portfolio is still growing
Chairman Jim Strang points the finger at a broad software sector sell-off, driven largely by fears that artificial intelligence could disrupt existing business models. That is not an excuse pulled from thin air. HgT says the average multiple for the IGV software index declined by about 25% in Q1, and the -9% hit to HgT’s portfolio from multiple changes was in line with guidance given alongside the FY25 annual report.
The interesting part is Hg’s argument that its portfolio is not full of generic software names that AI can easily sweep aside. Instead, it focuses on vertical software businesses with proprietary datasets, deep customer workflows and applications where outputs need to be 100% accurate. If that is right, these are exactly the kinds of assets that should be helped by AI integration rather than destroyed by it.
I think that is a reasonable defence, but investors should still treat it as a thesis rather than a fact. The portfolio is clearly trading well today. Whether the market gives those assets better ratings again will depend on confidence returning to the software sector, not just on operating performance.
HgCapital Trust share price has fallen far more than NAV – that could matter
The share price move was much uglier than the NAV move. HgT’s share price total return fell 22.9% year-to-date, with the shares at £3.88 at 31 March 2026 and market capitalisation at £1.8 billion.
Put that next to the £5.28 NAV per share and the shares were trading at a hefty discount to asset value. On those figures, the discount is about 26.5%. For bargain-hunting investment trust investors, that is the number that jumps off the page.
The positive interpretation is obvious: if the portfolio keeps growing and valuations stabilise, that discount could narrow sharply. The negative interpretation is just as clear: the market may be saying it expects further valuation pressure, more volatility, or simply wants a bigger margin of safety for private equity exposure.
Recent exits at premiums give some support to HgT’s valuations
One encouraging point in the announcement is that realisations are still happening at decent levels. HgT generated £91 million of realisation proceeds in Q1, against £42 million of investments.
The standout was Intelerad, realised at an uplift of more than 60% to book value. There was also a partial exit of Septeo, with HgT converting its fund exposure into a fee-free co-investment of a similar amount, and the exit of Geomatikk was announced in March for completion in Q2 2026 at a small uplift to its December 2025 carrying value.
That matters because exits are the acid test for private equity valuations. Anyone can mark a private company on paper. Selling an asset above book value is stronger evidence that the carrying values are not fantasy numbers.
Liquidity, commitments and the HgCapital Trust buyback programme
The balance sheet looks manageable, but it is not something to ignore. HgT reported pro-forma available liquid resources of £297 million, equal to 12% of NAV. That includes a £375 million credit facility, of which £259 million is undrawn.
Against that, outstanding commitments to Hg funds total £2.1 billion, or 88% of NAV. That sounds huge, and it is a big number, but £1.6 billion of it relates to recent commitments to Hg’s 2025 and 2026 vintage funds, expected to be called over the next five to six years, not all at once.
The board has also acted on the weak share price with a buyback programme launched on 6 February 2026. So far, £19 million of shares have been repurchased. I see that as sensible capital allocation when the trust is on a wide discount, though buybacks alone will not fix sentiment if software valuations keep falling.
What this means for retail investors in HgCapital Trust
This update is neither a disaster nor a triumph. Operationally, HgT looks solid. The portfolio is still posting 16% revenue growth, 19% EBITDA growth and a strong 34% EBITDA margin, which is exactly what you want from a high-quality software and services book.
The problem is valuation. When the market cuts the rating it is willing to pay for software assets, private equity trusts feel it too, even if the businesses themselves keep performing. That is the pain point here.
If you already own HgT, this RNS says the underlying engine is still running, but market sentiment is firmly against the sector. If you are looking at it fresh, the wide discount to NAV is clearly interesting, especially when recent exits have come at premiums to carrying values.
My view is that this is a cautiously positive operational update wrapped inside a negative market backdrop. The trust is doing many things right, but investors should be honest about the risk: until public software valuations calm down, HgT’s reported NAV may stay under pressure and the shares could remain volatile.
Long-term HgCapital Trust performance still looks impressive
One final point worth keeping in mind: the long-term track record remains strong. HgT says its 10-year share price total return is 15.4% per annum, outperforming the FTSE All-Share Index by 6.7% per annum over that period.
Over twenty years, a £1,000 investment would have grown to £9,254, assuming dividends were reinvested. The equivalent investment in the FTSE All-Share Index would be worth £3,599. Past performance is not a guarantee, of course, but it does show why investors keep giving HgT the benefit of the doubt when short-term turbulence hits.
