Picture supply: Getty Photos
The FTSE 100’s risen 12.5% in 2025 and 25% over two years, hitting new information alongside the best way. Buyers within the index will clearly be very glad with this, particularly when dividends are thrown into the combo.
Nonetheless, that’s small potatoes in comparison with the returns of 3i Group (LSE:III). Shares of the personal fairness agency have exploded greater than 100% larger in two years and 330% over 5 years. Solely Rolls-Royce and NatWest have crushed that within the FTSE 100 since August 2020.
This actually disproves the speculation that solely juicy returns could be delivered throughout the pond in New York!
3i at a look
I feel it’s truthful to say that 3i isn’t a family title. But it has a meaty £39bn market-cap, which makes it bigger than well-known companies like Tesco (£28bn) and Vodafone (£21bn).
So how precisely does the agency make cash? It does so primarily via shopping for stakes in unlisted companies. As they develop (larger gross sales, earnings, and valuations), 3i’s internet asset worth (NAV) rises. Or vice versa.
Finally, it sells these investments, producing capital features. For instance, in June, 3i bought its stake in MPM (a premium cat meals producer) for whole gross proceeds of about £400m. This was greater than triple what it initially invested.
Nonetheless, 3i’s portfolio is dominated by Motion, which makes up a whopping 71% of it (price over £19bn). That is the Dutch low cost retail chain that’s like a cross between Aldi and Poundland. It’s been increasing aggressively throughout Europe.
In June, Motion opened its 3,000th retailer. This jewel has pushed spectacular outperformance on account of 3i’s large 58% stake in it.
The corporate additionally owns 29% of the FTSE 250’s 3i Infrastructure, a stake that was valued at £921m in June. 3i Infrastructure paid 3i Group a £17m dividend in Q1 (masking the three months to 30 June). So it will get common earnings from right here.
Different portfolio holdings embody Royal Sanders, a European producer of non-public and residential care merchandise, and Baltic Sea ferry operator Scandlines.
Newest quarter
In Q1, the worth of the portfolio rose nearly 7% quarter on quarter to 2,711p. Motion elevated gross sales 18% to €7.4bn within the first half of 2025, with like-for-like gross sales up 6.8%. It opened 125 new shops and stays on monitor so as to add 370 in 2025. It’s going nice weapons.
The chance right here although is that 3i’s at the moment buying and selling at roughly a 50% premium to NAV. So buyers are having to fork out to seize a slice of the motion (no pun meant). If something damaging occurred to the low cost retailer, then 3i shareholders would instantly really feel it.
One other factor price mentioning right here is the best way Motion is valued. To reach on the worth of its stake, 3i applies fairly a steep EBITDA a number of for a retailer. Then once more, Motion often delivers robust progress and is taking market share, so this helps justify the valuation.
General, it’s laborious to not be impressed with the returns 3i generates. Its roots return to 1945, so it has its company-picking methodology right down to a wonderful artwork.
As a consequence of its top quality, I feel that is one for buyers to maintain on the radar, although ready for a dip is likely to be wiser given the chunky premium.
