Britain’s biggest equity backer of small and medium enterprises has not made a single new company investment in the past six months, its most fallow period for more than 20 years.

Michael Queen, the chief executive of 3i, said that the group was particularly cautious and the uncertainty of recent times had made many vendors and buyers sit on their hands.

“No one is sure of the real value of assets,” he said, adding that he had never known such a quiet period for new investment since he joined 3i in 1987.

The rocketing stock market had also got ahead of reality, he said, with investee companies finding trading conditions on the ground much harder than the 40 per cent to 50 per cent bounce in share prices since March would suggest.

“The underlying trading performance of most companies in most sectors across Europe it that life is tougher than that stock market performance would indicate.”

However, 3i was confident that investment volumes would pick up in the next 12 months and has assembled £2 billion of potential firepower to make acquisitions in traditional buyouts, growth companies and infrastructure deals.

It did invest £190 million of new money in the six months to September, but this was entirely into existing portfolio companies needing rescue or other capital. That compared with £668 million in the corresponding period of last year.

Traders were disappointed with the group’s figures, which showed the adjusted net assets per share growing by just 3.2 per cent between March and September, a period when global stock markets have boomed. 3i shares were marked 4.1 per cent lower to 267½p, the second-worst performing FTSE 100 stock yesterday.

3i values its assets by means of a multiple of profits. While the multiples it uses have been lifted, the benefit was largely offset by smaller profits from companies in the portfolio.

Actual or forecast profits for the 170 companies in the portfolio had fallen by 6 per cent, but to be conservative, 3i used a 13 per cent profits decline for valuation purposes.

The company tapped shareholders for £732 million in May in a nine-for- seven rights issue at 135p to strengthen its balance sheet. Net debt has fallen from £1.9 billion to £854 million.

The dividend was slashed from 3.8p to 1p. 3i has pledged to pay out as much in total dividends this financial year as the £24 million that was disbursed last year, but the cash will be spread across many more shares because of the rights issue.

Mr Queen said he was cautious about economic prospects. “I had hoped to be reporting clear evidence of an upturn. Unfortunately at this stage we are only seeing clear signs of recovery in India and China.”

The picture on the US was “mixed” and Europe remained “challenged”, “which may create a tough environment for some time to come”.

He said that 3i was well placed for when the economy properly started to pick up. “When the economy genuinely turns, the demand for working capital will really spike.” With banks constrained from supplying the necessary capital, 3i would be able to fill the gap.

Highs and lows

Hits...

• In 2008 3i invested £100 million in Quintiles Transnational Corp, the clinical research group. Value today: £148 million

• In 2006 it paid £105 million for a stake in ACR Capital, the Singapore reinsurer. Value today: £135 million

• In 2005, it invested £20 million in Ambea, the Nordic care homes group. Value today: £133 million

...and misses

• In 2007 it invested £83 million in Mold Masters, the plastics processor. Value today: £35 million

• In 2004 it put £49 million into backing the buyout of the Hobbs women’s wear chain. Value today: £22 million

• In 2007 it put £35 million into Pearl (AP), the group behind Agent Provocateur. Value today: £18 million

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