Harbourvest Global Priva... Share Discussion Threads

[donald pond] 21/6/2022 11:37

BTW I have a call with HVPE tomorrow afternoon. If anyone has any questions let me know.

[skyship] 21/6/2022 11:24

Feddie - the FT is sub only. Could you post the article itself perhaps. Thnx...

[feddie] 21/6/2022 10:48

All boils down to how credible is the NAV. The complex structure of HVPE makes it very difficult to try to assess any valuation. Markets are not believing that NAV is what the fund managers are saying it is.

Some colour:

[skyship] 21/6/2022 10:15

Thnx to Skinny for alerting me to the HL ino feed.

Seems as though the discount has widened out to the Covid low of Mar'20. At 2080 the discount is at 45%!

[rambutan2] 15/6/2022 21:34

Msg from Capital Mkts Day today was that no sign yet of big valuation falls, and all seems fairly fine except for the large late stage growth stuff which the newbies piled into. As always, high quality, experienced managers will ride out any storms and produce the 2x + multiples that they always have. So not bearish and not bullish, play the long game.

[riverman77] 14/6/2022 17:53

Now on a c.48% discount after recent share price falls, combined with GBP/USD weakness.

[skyship] 05/6/2022 12:37

Sorry folks - hadn't noticed the APAX declaration of their Mar'22 NAV. Down 10p to 244p, so discount reduces to 25% from 28%.

[novision] 05/6/2022 12:13

Thanks Sky - always fascinating to hear your thoughts.

[makinbuks] 01/6/2022 13:02

Thanks, interesting. I am following your thoughts and analysis on the PE thread

[skyship] 31/5/2022 20:57

Makinbucks - looked at that presentation - not impressed. No mention of yield as a DCM.

I track 17 PE trusts.

# Cut out LMS (inevitably) and:

# the two liquidating trust - DNE & JPEL (I hold this one - accepting every tender at NAV, then reinvesting at c25% discount - a very profitable game!)

# that leaves 14. 4 pay pitifully low dividends (BPM, CLDN, HGT & OCI)

# that leaves 10. 2 pay no dividend - HVPE & PIN - shame on them...

# that leaves 8. BPET, ICGT, LTA, MVI, NBPE, PEY, APAX & APEO.

MVI is a bit of an oddball, but provides a 36% discount and a 7.9% yield.

Best "genuine" yielders are PEY (1125p = 26.3% discount & 6.78% yield) & APAX (183p = 28.0% discount & 6.74% yield).

EDIT - APAX Mar'22 NAV declaration reduces discount to 25%

[makinbuks] 31/5/2022 15:27

Sky, I should have added, that presentation was not in isolation. It has been a consistent theme of Tredget’s presented on multiple online platforms and with the green boxes gradually increasing over time

[makinbuks] 31/5/2022 15:25

hxxps://oakleycapitalinvestments.com/wp-content/uploads/2021/05/OCI-Capital-Markets-Day-2021-Presentation-vWeb-1.pdf

See slides 14 - 16, to get the full effect you need to hear Steven Tredget present it. But the gist is, there’s no silver bullet, all these are contributory factors, we are working on all of them but one or two are just structural and we have to accept (eg its Dubbens vehicle and that’s a strong positive USP in some eyes and a potential governance issue in others, but it is what it is)

Again, don’t want to wander off topic, the specifics at OCI (and TFG) are not relevant to HVPE directly but it just makes the wider point that neither a dividend , nor a share buyback is guaranteed to close a discount

[skyship] 31/5/2022 14:02

Makinbucks - OCI - another PE trust with a good growth record, but paying a miserable 4.5p dividend each and every year, so a yield of just 1.15%! Also some rather token buybacks; though they do indeed do some. That may account for their discount level at a mere (sic) 27.5% at the moment - this versus the average of c35% for peers.

Perhaps you could post a link to their presentation on DCM, as it doesn't appear in their Annual Report.

[makinbuks] 31/5/2022 13:17

I think you need to do both if you are selling to the retail market but the reasoning is completely different. The retail market likes a regular return in the form of a dividend even if its modest in % terms. This is to do with long term confidence.

The buyback is an effective way of dealing with excess capital but I believe the current regulations play into the hands of market makers and so shareholder benefits are curtailed. I think Tania’s maths is correct but to get the full effect you need a direct tender offer from the company to shareholders rather than the drip feed on market buyback that is so common.

Even then it isn’t necessarily a silver bullet to fix the discount problem. Some of you may be familiar with Tetragon for example where the annual tender offer is widely derided and does nothing for the discount. The reason there is that other, more significant matters prevail around governance and share structure. Those issues do not apply to HVPE. None the less, if you follow the excellent presentations from OCI on discount reduction you get an appreciation of the range of actions that are necessary. And even then, OCI still trades at a discount albeit not on the scale of HVPE. At that point you have to accept that there is a structural issue around the opacity of PE and the earnings lag

[tania67] 31/5/2022 12:12

@skyship- My preference would be for buybacks (=organic return + NAV/shr uplift + maybe discount narrows). You would prefer a dividend. But we agree that the current endless reinvestment policy stinks!

[riverman77] 31/5/2022 10:12

A number of the other PE funds pay modest dividends and HVPE really needs to start, even 2% of NAV would be better than nothing. This is the easiest way to return some of the cashflows to shareholders at NAV, while still leaving most of them cash for reinvesting. It should also help reduce the discount as dividends will always appeal to investors.

[skyship] 31/5/2022 10:01

Tania - the problem with HVPE just reinvesting and reinvesting, is that there is no logical end benefit for shareholders. The discount could in theory mushroom from 30% to 40% to 50% etcetcetc, as management is the only cashflow beneficiary.

Life doesn't work like that of course; but the extreme argument exposes the stupidity, or at least unfairness, of the HVPE position.

They need to be told by the institutions to amend their policy and declare semi-annual dividends based upon NAV. 3% of NAV pa would seem abundantly affordable when they have been growing assets by 21%pa for the past 5yrs.

I wish I could attend the AGM and give them both barrels; but others have to step up to that one.

Incidentally, that 3% NAV figure would deliver a 4.83% yield at 2350p.

[tania67] 31/5/2022 09:42

Putting some illustrative numbers to the options might help clarify the buyback/dividend debate.

Over the last 5 years, HVPE’s NAV return was 21% per annum (AIC data). Let’s be generous and assume that, though risky, future returns will on average be equally high. What should be done with the cash flowing in from maturing investments?

(1) reinvest them in new PE projects at a risky 21% (HVPE’s choice).

(2) Distribute them to us to invest as we choose (dividend)

(3) Use them to buy back shares, generating an immediate risk-free NAV/shr uplift, after which this uplifted NAV/shr can be expected to continue to grow at a risky 21%.
Cashflows are currently strong: HVPE has committed $510 million to funds in the last four months alone. This cash could have been used to buy back 15% of its shares. At a conservative 25% discount this would cost 11.25% of assets, generating a 3.75% NAV/shr uplift. Hence we would be expecting a 24.75% annual return.

Note that these numbers assume an unchanged discount. If the discount narrowed, even better.

[apple53] 30/5/2022 10:35

A bit like Sky, I bought HVPE close to recent lows. Unlike Sky, I think, this was adding to an existing position, so I was averaging down. Although tempted to take some profit, I plan to hold on as long as I can. Although I'm hoping for a near term pullback to get out of my painful hedges, I expect the markets to rise materially from here, and therefore for the NAV to continue to grow and the discount to shrink modestly.
As ever, and time permitting, I will be on the lookout for more compelling names, and as I have little cash my HVPE holding could be a source of cash for these. As discussed above, the lack of stamp duty makes HVPE less painful to trade than most.

Sky in the PE thread and elsewhere is always very helpful in noticing value opportunities. I recently doubled up on Herald (via spread bet), but didn't have time to post, but otherwise have been mostly inactive in the IT space, just watching most things fall and wishing I had more cash.

[skyship] 30/5/2022 07:37

Many interesting contributions re buybacks above. Ken again almost viscerally anti buybacks; though there is plenty of positive evidence for them in the REIT & general IT sector where they are used as an effective DCM - including buying back at a discount and reissuing at a premium.

Still, I agree with him in respect of the PE trusts. Personally I think HVPE and PIN, the two standouts, should be issuing a dividend calculated on NAV. Simply giving shareholders a basic return seems fair and reasonable - it is usually after all why pension funds and shareholders buy into a company.

The mealy-mouther statement about more PR activity to enlighten the market as to why the stock is undervalued, is really just a limp expression for doing nothing. The investment managers fees are based upon an ever-increasing pool, so why reduce it each 6months by giving something back to shareholders. Bah humbug - crassly absurd corporate governance IMO.

[apple53] 29/5/2022 23:28

I have to weigh in (even if it's more feather- than heavy-) in support of Tania.
Yes multibaggers are possible in terms of their own investments, but that's not the point. Forecast average return over time, adjusted for appropriate leverage and (multi layers of) fees is the right comparison. On your argument, Ken, (admittedly taken further than you would wish to push it), HVPE should be issuing shares at these levels since they can justify it based on expected future returns (I know some shipping companies who do this).
Donald's sums are very compelling indeed and make the point that they would have to be very confident indeed about new investments not to allocate a portion of returning cash to buybacks, with 2 provisos - 1) that they aren't at risk of losing critical mass by shrinking the assets too much, and 2) that they are in a situation where leverage is not at the higher end of their comfort zone.
I do also see the value of dividends, but not everyone is holding via an ISA so for many there will be tax benefits to improving market cap at the expense of not paying dividends.

One small point is that I hope they calculate the discount more accurately than we can, by making a true estimate of real-time NAV, and if they know something we don't (eg about mark-downs to come), then the discount may not be as high as we think, which could change the equation.

Although there are examples of trusts whose buyback programs appear not to have helped shrink their discounts, there are also many for which it does seem to have helped, and of course since the NAVs are higher, an unchanged discount is still a higher share price than without the buyback.

[lynton3] 29/5/2022 18:50

The other three are ICP, Pantheon and Oakley.

[skyship] 28/5/2022 18:51

lynton - sensible decision. Keep us informed of your experience over on the PE thread.



Incidentally, which are your other three?

[lynton3] 28/5/2022 17:06

Donald Pond
I recently decided to invest 1/3rd of my portfolio in quoted PE companies, and selected what I believe are the four best companies, HPVE being one of these.

All four have excellent long term track records, but three of them also pay a dividend - which, due to the present discounts in the sector, are quite reasonable yields.

I selected HPVE as the fourth investment due to its LT record + its very high discount. It would have been my first selection if it paid a dividend.

It seems to me it's a no-brainer for the company to introduce a dividend policy. Is there a compelling argument not to pay a dividend?

[skyship] 27/5/2022 20:39

Feels more like the knackers yard some mornings!