Andrew Lebus, manager of the trust, explains: “The purpose was to provide those investing through the stockmarket with an opportunity to access best-of-breed private equity assets worldwide through managers that we select because they are, in our view, best in breed, and to do that in order to maximise long-term capital growth.”
Mr Lebus says the trust has more than 70 investment professionals at its disposal, who are based around the world. They aim to identify among the many private equity managers which ones are investing in a way that will deliver capital growth.
He adds: “That means looking at which managers we think have [been] a success, looking under the bonnet as to how they’ve achieved that success. One hears a lot about value-
added investment in the private equity market; we’re looking to test where we believe that is really coming through and, through that process, select managers we consider to be among the best in the world.”
The manager estimates that in a three- to four-year investment period Pantheon, as an investment house, is putting capital to work with between 125 and 150 managers.
“That provides a platform through which we can look to deploy capital, not only as an investor in their new funds, which we call primary investing, but also by buying secondary interests in those funds partway through their lives of other investors who have, for whatever reason, decided they no longer want to hang in for the duration,” Mr Lebus notes. “And thirdly, we can also look to co-invest with those selected managers, so as to get capital to work alongside them in the companies that they are investing with, which we do on a managed basis.”
He summarises: “So our approach is to identify what we consider to be the best managers available and then to put capital to work with them, not only by investing in their funds when they raise those funds, but also by buying secondary interests and by co-investing with them, so a flexible way of getting capital to work with those managers.”
Mr Lebus acknowledges the use of macroeconomic factors in the investment process, too.
“The way that we do use macro information is to understand more about the sustainability or the near-term recovery prospects of certain markets and to adjust our investment appetites for particular investments in different market circumstances,” he says.
It is worth noting that the trust has ongoing charges of 1.34 per cent.
The trust has clocked up several years of outperformance, according to FE Analytics, and sits in the top quartile of the AIC IT Private Equity sector over one, three, five and 10 years.
In the five years to October 31, the trust delivered a whopping 262.17 per cent return, against the sector average of 85.74 per cent. Its performance is equally impressive over 10 years, during which time it generated a return of 132.24 per cent, compared to the sector’s 92.23 per cent return.
Mr Lebus refers to the investment trust’s mature portfolio of assets when explaining its recent performance, and the fact that the funds it is investing in are themselves fairly mature. “Because of that, they are within a period within which most of the activity is about harvesting the gains of the assets that they’ve invested in and selling those assets at an appropriate time in order to do that,” he adds.
Foreign exchange effects can detract from performance, Mr Lebus observes, with the trust exposed to different currencies via investments in assets around the world. However, he reasons: “I think over the short term, currency effects can be quite pronounced. Over the longer term, it is our view that as an investor seeking capital gains over long periods, currency effects shouldn’t make a big difference to your actual investment outcomes.”
EXPERT VIEW
Ben Willis, head of research, Whitechurch Securities
This is a trust that has truly global exposure, mainly achieved through investing in private equity funds, although some direct investing is also carried out. The trust has certainly benefited in recent years from having more than 50 per cent of the portfolio in the US, and has delivered exceptional performance across the medium term. The vintage of the portfolio is very diverse, stemming from the fact that this trust is the longest private equity fund-of-fund trust on the market.
