The Investment Column: 3i fully priced

YOU HAVE to admire Brian Larcombe, the chief executive of 3i, the venture capital group. He has certainly managed to put the disappointment of the summer's failed bid for Electra behind him.

When the bid for the rival venture capital trust was launched, 3i looked to be in imminent danger of falling out of the FTSE 100 and thereby losing its "must-have" status for institutional fund managers. Indeed, despite 3i's protestations to the contrary, there were many in the City who believed that the fear of relegation was the main motivation behind Mr Larcombe's vain attempt to buy Electra.

However, with 3i's share price jumping from 705p to 950p in five weeks, the group is clearly out of the danger zone. That is despite yesterday's price retreat to 900p after first-half net asset value - the traditional yardstick for investment trust performance - came in at 645p; a rise of 7.3 per cent, but still some way behind what most City analysts were expecting.

Since the collapse of the Electra bid, Mr Larcombe has concentrated on reshaping 3i. First, he has set about tackling its long tail of small company investments that it has held for more than seven years. Second, he has been working to fulfil his promise to raise the proportion of technology investments in 3i's portfolio to 30 per cent by 2003. The proportion is now at 24.2 per cent.

This is all sensible stuff. But the fact remains that the weaknesses 3i highlighted through its decision to go for Electra - the lack of expertise in handling the big leveraged buyouts and the lack of European expansion to meet expectations - are still there.

Warburg Dillon Read is holding its full-year net asset value target at 690p to 700p. After the recent rally the share price looks fully up with events.

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