The attractions of investing in unquoted businesses are clear — the chance to take positions in early-stage, little-noticed companies that could one day float or be sold and offer a handsome return.
However, there are pitfalls. The business could fizzle out, implode, or turn out to have been wildly overvalued. The promise of riches could evaporate into dust overnight.
This is a risk that Caledonia Investments is happy to take, in spadefuls. At the end of September six of the trust’s top ten investments were in unlisted companies and only one of them, Microsoft, a publicly tradeable group.
That’s not the only eyebrow-raising issue with the £2 billion trust. It is typical for investment trusts’ shares to trade at a discount to the underlying value