Literacy Capital: Private Equity with a Charitable Mission

Literacy Capital deliberately targets small UK companies, typically £1m–£10m of EBITDA, that the large buyout firms tend to ignore and that ordinary investors cannot normally reach. These are often founder-owned businesses with thin management teams, where bringing in experienced executives and funding bolt-on acquisitions can transform value. Because so much capital has chased bigger deals, this end of the market is less competitive, which can mean better entry prices. Through the investment structure, BOOK packages this hard-to-reach private equity strategy inside a London-listed share that provides liquid access to an otherwise inaccessible part of the market.

The clearest signal that the model works is what buyers pay for the businesses when they're sold. Across 2025 and into early 2026, the trust sold three mature holdings at a combined 39% premium to their last reported valuations, and the Velociti exit alone returned almost 15 times its original cost. The shares, however, tell a different story. Like much of the listed private equity and wider investment trust sector, where persistent discounts and a shrinking UK investor base have weighed on share prices for years, BOOK trades well below the value of its underlying portfolio. For long-term investors who believe that value is real, validated repeatedly by cash exits above carrying value, that gap between price and worth is the heart of the opportunity.

Few trusts pair commercial ambition with a built-in social mission. Literacy donates 0.5% of NAV each year to UK reading charities, principally Bookmark, which supported around 181,000 children in its latest academic year. Just as important is the alignment behind the returns. The managers and their families own more than half the trust's shares and take no carried interest, so the decision to sell a business is driven by what is best for shareholders, not by a fee clock. When the people running the money are also its largest owners, their incentives and yours point the same way.

• Discount-narrowing actions: notable buybacks and investor engagement initiatives could begin closing a record-wide discount.
  
  

• Further exit news: additional disposals at premiums to carrying value would reinforce that NAV is conservative.

• Capital returns via the B-share scheme: having made its first B-share distribution (£6m, 10p per share) in late 2025, and now in net cash, the trust has flagged scope for further returns as exits complete. The scheme returns capital by issuing and immediately redeeming bonus shares for cash.
  
  

• Recovery at underperforming holdings: improved trading at the businesses that dragged 2025, now under new leadership, would lift performance.

• Compounding the model: recycling exit proceeds into new founder-led businesses, building NAV per share over years.
  
  

• New platform investments: with net cash and a £50m credit facility, BOOK has firepower to make new platform investments in a market where weaker conditions are surfacing attractively priced opportunities.

The shares trade well below NAV, recently around a 33% discount on the Q1 2026 factsheet and described by management as the widest in the trust's history. Even with strong exits, a discount that stays wide reduces returns for shareholders, and can persist if sentiment toward listed private equity and UK smaller companies stays weak. While a wide discount can be seen as an attractive entry point, there is no guarantee it will close, and it could even widen further.

The portfolio is deliberately concentrated, with the ten largest investments making up the bulk of NAV and the single biggest holding represents a meaningful share on its own. This structure amplifies winners, but it cuts both ways: a setback at any one of the major holdings can have an outsized effect on overall performance, as the trust saw in 2025. Management argues that concentration reflects letting strong performers run, but heavy reliance on a handful of names remains a genuine source of volatility.

Nearly all the underlying businesses are UK-based, leaving the trust dependent on the direction of the UK economy and government policy. Shifts in areas such as employment costs, taxation or business confidence feed directly into how the portfolio companies trade, and therefore into their valuations and the timing of exits. Diversification across sectors helps, but the concentration in a single country is a structural feature investors should consider.