My favorite UK inventory’s a FTSE 100 fixture with a market-cap of just about £30bn. But it by no means appears to be on many individuals’s radar. It’s flying excessive on mine although.

I’m speaking about non-public fairness and infrastructure specialist 3i Group (LSE: III). Every time I checked out the 3i share it was going nice weapons. So after I shifted some firm pensions right into a Self-Invested Private Pension (SIPP) final yr, it was one of many first shares I purchased.

3i Group’s now the largest single direct fairness holding in my portfolio, having risen 56% since I added it to my SIPP on 3 August final yr. And that’s not a one-off.

Blue-chip outperformer

The funding belief is the fourth finest performer on the FTSE 100 over the past yr, up 52.85%. Over 5 years, it’s in third place, up 172.42%, overwhelmed solely by Frasers Group (up 280.98%) and Diploma (190.59%).

That is notably spectacular, given that non-public fairness’s going by way of a troublesome time, as greater borrowing prices hit fund-raising, dealmaking and exits.

It doesn’t appear to have harm 3i Group although. Full-year 2023 outcomes confirmed a complete return of £3.84bn, equal to 23% of opening shareholders’ funds. That was down from a 36% return of £4.86bn in 2023, however nonetheless fairly stable. It’s began 2024 fairly effectively too.

The group has liquidity of £1.3bn, which incorporates £336m in money and £900m in an undrawn revolving credit score facility. Web gearing’s a surprisingly modest 4%.

My first concern is that its outperformance has been boosted by one tremendous profitable funding, Dutch non-food discounter Motion. It’s booming with 2,300 shops throughout 11 European international locations. Final yr, it generated a gross funding return of £3.7bn, or 33%. Motion now makes up 31.32% of its portfolio.

Energy of three

3i Infrastructure plc is the fund’s second greatest holding at 8.53%. Nonetheless, it’s lagged the remainder of the portfolio, hitting the general return.

The 3i share price has idled currently and I’m not anticipating it to all of the sudden go gangbusters. These are robust instances for the mid-cap M&A US and European promote it operates in. I’m ready for a much less spectacular return in future, however I nonetheless reckon it might probably proceed to outpace the FTSE 100.

There are dividends on supply, in addition to progress. 3i’s trailing yield is a lowly 2.01% however that’s largely down to its share price surge. The board’s progressive, mountaineering the newest full-year cost by 15% to 61p per share.

My greatest fear is at this time’s sky-high valuation, with the belief buying and selling at a whopping premium of 37.86% to internet asset worth. Administration has an excellent observe document relationship again to 1945, however the danger/reward ratio seems to be a little bit skewed. Particularly since 3i now makes up virtually 10% of my whole SIPP.

I received’t purchase extra at at this time’s excessive price however I’m not promoting what I’ve bought. As an alternative, I’m going to let it run and run. I nonetheless consider within the energy of 3i group.