Caledonia Investments (CLDN) Investor update summary

Investment strategy and performance

• Focuses on long-term, risk-managed absolute returns, targeting inflation +3%-6% and achieving 9.8%–13.3% per annum over the last decade, with a consistent dividend record spanning over 50 years.

• Portfolio diversified across public companies, private capital, and funds, targeting annual returns of 10–14% and achieving 10–13% p.a. over the past decade.

• Strategic allocations: 30–40% in funds, 25–35% in private capital, and 25–35% in public companies, with a high-quality, global approach.

• Investment approach centers on high-quality businesses, diversified across private and public markets, with a strong alignment of interests between the investment team and shareholders.

• The fund strategy represents 30% of NAV (GBP 894 million), with two-thirds in North America and one-third in Asia, targeting lower mid-market private equity and macro growth themes, respectively.

Portfolio construction and manager selection

• Rigorous manager selection process based on team quality, investment thesis, and track record, with deep due diligence and long-term relationship building.

• Portfolio includes 46 approved managers across 82 funds, providing exposure to over 600 companies, with intensive ongoing monitoring and advisory board participation.

• Selection process narrows from 2,350 GPs to a portfolio of 46 GPs and 82 funds, ensuring diversification and quality.

• Preference for smaller, operationally focused funds where alignment and value creation are prioritized; significant on-the-ground presence in both North America and Asia.

• Fund of funds used initially for market access and relationship building, now being gradually reduced as direct knowledge and networks expand.

North America focus

• Targets the lower mid-market with ~400,000 companies, $2m–$10m EBITDA, and a fragmented landscape offering operational value creation.

• Portfolio includes 45 managers and 30 funds, valued at £567.3m, with 200 companies and a weighted average age of 4.3 years.

• Achieved strong long-term returns: 19.8% (3 years), 18.9% (5 years), and 16.4% (10 years) annualised in GBP.

• North American investments focus on founder-owned, cash-generative businesses, leveraging operational improvements and professionalization for value creation.

• Entry multiples in the lower mid-market remain lower and more stable compared to broader US buyouts.