3i private equity returns reach almost 1 bln pounds at half year

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By Dasha Afanasieva and Kit Rees

LONDON, Nov 10 (Reuters) - 3i Group said on Thursday its private equity business made returns of almost 1 billion pounds ($1.2 billion) in the six months to Sept. 30 after benefiting from the fall in sterling.

Helped by the performance of the private equity arm, the group, which invests in northern Europe and North America and also has infrastructure and debt management divisions, produced an investment return of 1 billion pounds or 23 percent of opening shareholders' funds compared with 168 million in the same period in 2015.

Equity analysts said the rise in the group's net asset value per share to 551 pence from 463 pence on March 31, 2016, was in line with expectations.

But 3i shares closed down 7.78 percent. A trader cited a broader sell off in European equities and some profit taking in a stock which had rallied more than 25 percent this year.

Chief Executive Simon Borrows said the London-listed group would continue to be active in both deploying capital and realising its investments for the remainder of the financial year, which ends in March 2017.

He said there had been limited impact from Britain's vote to leave the European Union on the group but the steep fall in sterling benefited the investment portfolio's performance as it is reported in pounds. The group recorded a total net foreign exchange gain of 283 million pounds.

3i said lingerie retailer Agent Provocateur continued to be impacted by falling luxury spending and had also suffered from the inconsistent execution of its recent store expansion programme and the discovery of accounting problems.

"Reflecting these challenges, we reduced the value of our investment by 39 million pounds in the period," 3i said.

With (Other OTC: WWTH - news) very low interest rates globally, alternative investment funds are benefiting from a flood of capital looking for yield. But this has resulted in more private equity money chasing deals and pushing up valuations.

"I believe we are going to be locked into a low interest rate environment in Europe, where most of our investments are, for some time to come," Borrows said on a call with reporters.

3i declared an interim dividend of 8.0 pence, half of its base dividend and said the board expected to recommend a total dividend for the year of no less than the 22 pence, paid in the year to March 31, 2016.

It made 654 million pounds after selling assets such as owner of baby brands Mayborn and more recent investments such as Geka which makes cosmetic brushes and Basic-Fit, a discount gym operator.

($1 = 0.8037 pounds) (Editing by Jane Merriman and Mark Potter)