The trust, launched in December 2007, is a fund of private equity funds that offers its shareholders capital appreciation over the long term, without taking unnecessary risks.
“After 30 years in business, the team and investment committee have seen enough market cycles to know what to look for. The one sure way to destroy NAV for investors is to pick bad managers and we think that performance and the NAV of this vehicle, which has been one of the best in the past five years, is down to that manager selection,” Mr Howard says.
Most recently, the trust bought the assets of the Conversus Capital portfolio, one of two significant deals made in the past year-and-a-half. “In the past 12-18 months, we have continued our policy of trying to seek opportunities in the listed sector. In the Autumn of 2011, we bought Absolute Private Equity – a Swiss-listed private equity firm – and in December 12, we took on the assets of Conversus. We think there is still opportunity in that sector.”
PROCESS:
Mr Howard and his investment committee, with a combined experience of more than 30 years in the private equity sector, work closely with managers to understand their investment processes.
“We look at their track records and motivations because if we pick good managers that have good asset selections then that will grow the NAV,” Mr Howard says. “There is nothing magic and there are no set biases. We will go where good investments are to be made.”
In the first half of this year, the net asset value of the trust has growth by 4-5 per cent, according to the manager, which he suggests have been a result of the three initiatives put forward in the annual report published in May 2013. As well as stating the intention to review its corporate governance structure, currently only being listed on Euronexxt and specialist fund markets which Mr Howard claims are “illiquid” and committing to making more investments to grow the net asset value of the trust in the long term, the annual statement set out changes to the trust’s distribution.
Mr Howard explains: “Because of the two deals, we are going to allow a distribution of $20m in 2013 and $20m 2014 which is equivalent of about 2.5 per cent yield on the share or 24 cents per share. We hope that people and shareholders will see the value. We have listened to the market that said it would like to see cash at NAV and this is a way to do that.”
The $500m credit facility on the trust was recently renegotiated and will remain in place until December 2014 at which point it will be reduced to $300m. Mr Howard says that the facility has been used “opportunistically with two separate deals which has enabled the two share redemptions at NAV”.
PERFORMANCE:
According to data from Morningstar, from launch to September 17, the HarbourVest Global Private Equity investment trust has delivered more than five times the AIC Private Equity sector average on a share price total return basis.
The trust delivered 25.45 per cent in the period, while the sector average only delivered 4.84 per cent. On a discrete-year basis, the trust’s performance suffered in 2009, when global stockmarkets had buckled under the pressure of the financial crisis and investor confidence had taken a significant knock.
Overall, however, for those willing to look further than traditional equity funds for capital growth, an investment in a product such as this could be fruitful, providing they are happy with the heightened risks involved in this asset class.
EXPERT VIEW
Innes Urquhart, investment trust research analyst, Winterflood Securities
Verdict
HarbourVest Global Private Equity is a fund of private equity funds providing highly diversified exposure to a global portfolio of private equity investments. As one of the world’s largest alternative asset managers, HarbourVest is well placed to gain access to the world’s best private equity managers and, with a market capitalisation of $814m, the fund is one of the largest in its peer group. Recent performance has been strong, with the NAV up 46 per cent in the past three years. This has been helped by the acquisition of both Absolute Private Equity in 2011 and Conversus Capital’s private equity portfolio in 2012. As a result of these acquisitions, the fund’s gearing currently stands at 11 per cent. Nevertheless, the mature portfolio remains cash generative and on a 24 per cent discount, we believe the shares offer value. However, investors should be aware that in spite of its size, liquidity in the fund’s US Dollar denominated shares can be patchy.
