Harbourvest Global Priva... Share Discussion Threads

[apple53] 21/9/2022 13:52

Up til today, I had thought the comparison that mattered was NPV uplift of new investment vs NAV uplift from buyback.
Then I thought you might have discovered a deeper truth. In a sense you have, ie that returns on the existing portfolio do matter, since the expected (btw, not actual) return on any incremental investment is unlikely to be massively different from the portfolio as a whole. [Yes opportunities might be somewhat better during market turmoil.]

A key element is indeed looking at it from the perspective of the investor. They may feel that the cash spent on buybacks has gone forever, so yes they can achieve a 50-100% return instantly on a buyback (for a discount of 33-50%), but they can't use that same cash to triple its value over x years.

However, if I sell 10% of my shares when HVPE repurchases 10% of its total shares, then I get the NAV (and AT LEAST corresponding price) uplift on my 90%, and I get to reinvest the sale proceeds. For example I can buy back into HVPE and still make the normal HVPE return. And since we've established (see above) that return on existing portfolio is likely to be similar to any incremental investment, then the buyback impact on NAV really is fully incremental (at least on the 90% of shares that I retained).

I think I'm getting there gradually.

I still can't believe I didn't buy more this morning, even at 2160. New news on both NAV and buybacks should really have a big impact even if slowburn, even if the buybacks are relatively muted.

I also take your point about selling existing investments to buy bigger opportunities, though there are caveats again in terms of long term commitments etc.

[tania67] 21/9/2022 11:24

Apple - example below (hoping the formatting stays intact!).
The current discount of nearly 50% allows them to buyback 2% of their shares using cash equal to 1% of their NAV.

Reinvestment would generate an equal NAV/shr effect if it instantly doubled its present value, but I don't believe this is feasible even accepting the very high risk.

Now Buyback Reinvestment
99 99 99+2 PE assets
1 0 0 cash
100 98 100 number of shares
1.00 1.01 1.01 NAV/shr

[tania67] 21/9/2022 11:04

Apple – you are right. If currently-available new deals offer prospective returns far greater than their existing portfolio they could in theory justify new investment.

But this extra (risky long-term) return would need to be very large to outweigh the riskless and instant benefits of a buyback uplift. And if they really believe this to be the case (and they believe that their current NAV is accurate) then they should sell all they can of their existing portfolio on the secondary market (even at a discount) to buy into these wonderful new deals… For this reason, I don’t think this argument works in practice.

Makinbuks – Agreed. I have been in touch with Richard before, and I thought he sounded sensible on this issue. Today’s lukewarm commitment to buybacks even at current massive discount has undermined that.

[apple53] 21/9/2022 10:49

volume today, so far, maybe 35k shares

[apple53] 21/9/2022 10:47

According to LSE, total volume yesterday was 98k shares. And almost 1k of the buys were mine! So it may be they mopped up the order book, but didn't then put a higher bid out there.
My theory is that they have a short window to grab as much as possible cheaply before there is a step change. That window may have been yesterday, when the potentially sellers didn't know who put the bids in the market. Maybe the window stretches into today, but surely not much longer.

[apple53] 21/9/2022 10:36

And in the time I wrote my waffle, I missed my chance to buy at 2140. Now 2160 offered.

[makinbuks] 21/9/2022 09:53

"The HVPE team is here to discuss any questions you may have, so please do not hesitate to contact Richard Hickman or Charlotte Edgar using the contact details below."

Why don't you put that to them Tania?

[tania67] 21/9/2022 09:35

Today’s announcement is pretty discouraging about the likely scale of buybacks. If that was due to liquidity concerns, that would be fair enough. But instead the announcement suggests a basic piece of financial illiteracy:

“The Board continues to believe that, under less volatile market conditions, HVPE's core strategy of reinvesting distribution proceeds into new HarbourVest opportunities represents the best use of shareholders' capital.”

This presumes that the NAV/shr uplift from buybacks comes INSTEAD OF the return on underlying PE assets. This is simply wrong. The uplift is IN ADDITION to the underlying asset return.

Suppose that the fund is fully invested in PE, but then a transaction generates some cash. Reinvesting in more PE keeps the fund fully invested. But buying back and cancelling shares also leaves the portfolio fully invested in PE assets. Both options give whatever percentage return these assets generate, but the buyback option generates an additional uplift.

The confusion is caused by thinking about absolute dollar NAV rather than what we shareholders care about: NAV/shr. Smarter management would leap at the current discount as an incredible opportunity: buying back a full 15% of shares at almost 50% discount would generate an additional instant and riskless NAV/shr uplift of 7%.

I am sorry to revisit this topic, but I have had enough! If board members do not understand the arithmetic of buybacks they are not the right people for the job.

[skyship] 21/9/2022 08:04

Finally HVPE embraces buybacks - Market not noticed; so a good opportunity to trade in at c2120p on a 48.5% discount:

"HarbourVest Partners, announces that on 20 September 2022 it purchased 82,821 of its ordinary shares ("Shares") at an average price of GBP21.1159"

"As communicated within HVPE's Annual Report published in May 2022, the Board has established a review process in relation to share buybacks centred on a set of key criteria for their possible implementation. Following the most recent review, the Board and Investment Manager have concluded that repurchasing the Company's shares at the current exceptionally wide discount to NAV represents an attractive investment opportunity at this time."

[skyship] 20/9/2022 13:44

That NAV calculated at an exchange rate of 1.162 - now c1.14!

[apple53] 20/9/2022 13:36

Thanks rambutan
I think that could be a record discount...

[rambutan2] 20/9/2022 12:26

Moving onto June valuations and ever helpful FX:

At 31 August 2022, HVPE's estimated NAV per share was $47.79 (GBP41.12), compared to the 31 July 2022 estimate of $48.29 (GBP39.67) - a decrease of 1.0% in US dollar terms.

This figure is now based largely on 30 June 2022 underlying valuations, whereas the prior month's estimate was still based primarily on 31 March 2022 underlying valuations. The valuation breakdown of the HVPE portfolio as reported here is as follows: 8% actual 31 August 2022 (representing the public companies in the portfolio); 79% actual 30 June 2022; and 13% actual 31 March 2022. Consistent with previous estimated NAV reports, valuations are also adjusted for foreign exchange movements, cashflows, and any known material events to 31 August 2022.

[cartan1blue] 25/8/2022 11:38

Interesting to see the trust team at JPMC being reasonably vocal about the need for HVPE to buy back stock. They are highly regarded, perhaps the management will take note. Regardless I am switching out of HVPE and into PIN over time

[apple53] 24/8/2022 15:59

I did write to Charlotte.
I cut and pasted Sky's message.
Only joking.
I want to check management and board share ownership. Anyone have this at fingertips?
I guess I should also study fee structure. Is there any element that could be moved to a market cap basis rather than NAV? Then need to look at how to get this proposed at AGM/EGM.
All too much hassle........

[skyship] 24/8/2022 14:31

CARTAN1BLUE - "I'd go further to say it should be the Board's fiduciary duty to do so at such a discount. How can you approve any other investment out of the company's funds?"

Agree 100% and have frequently stated such. The managers however know that paying dividends or making buybacks reduces the size of the company - so reduces their fees!

They seem to be able to skate on ice and get away with it; and there is absolutely nothing we PIs can do about such a parlous situation.

We can email or write, but they always make the same mealy-mouthed comments about reducing liquidity and preferring to rely upon MARKETING!

The truth is that the managers are a load of bandits who just love to put the portraits of all the managers up on the website; supposing that gives us confidence.

Hopefully one day an activist will happen along and blow this load of shysters out of the water.

[cousinit] 24/8/2022 13:07

Although if they keep sailing on making new commitments sized ignoring capacity for buybacks then any interventions may be quite small and piecemeal. Appreciate there is a balancing act here in terms of poor sentiment turning into concerns over fulfilling future commitments...

[apple53] 24/8/2022 12:02

Cousin - if I get time I do plan to hassle HVPE again about buybacks. I appreciate they keep saying no but at these discounts.....

[cousinit] 24/8/2022 11:12

I had held HVPE as a core PE trust for many years but sold down meaningfully over Xmas/New Year (at what felt like quite a painful discount of 20ish). I had started to top up again at these lower levels but the reluctance to offer any cash returns caused me to switch to other trusts like PIN which are at least returning some cash.

Given HVPE's size it feels like there needs to be a change in sentiment from IIs to buy in the volume that would close the discount.

[apple53] 24/8/2022 11:07

Bought £10k of ICGT and £20k of HVPE. Had to sell India capital growth, a little NBPE and even some precious OSB to add to modest cash.
HVPE priced at 21.55 for £10k. I split my second trade into two lots of £5k and got a better price on ii, 21.50. Still not under the theoretical offer though. Rare and a bit disappointing.
ICGT I got 2p cheaper than offer.

[apple53] 24/8/2022 10:52

I needed to listen to those nagging doubts when it rallied to over £24, even though the discount remained monstrous.
What has happened in the last month is as bizarre as anything we've seen. HVPE down 6% in a risking market (and ICGT down 9%!). The two lows you mentioned, Sky, were when world msci was 8%ish lower than now. That could obviously happen again, but I think the 1 month market risks are now biased to the upside.
Pantheon remains cheap but is up 8% in a month.

[skyship] 24/8/2022 08:37

Back to 2165p for a 45.4% discount! Sorely tempted, but these have twice recently been back to 2000p; so will wait awhile...


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[cartan1blue] 19/8/2022 15:51

I do hope the Board, Directors and Advisors to HVPE are watching what PIN are doing - buying back stock and increasing their marketing. For me, PIN is the much better stock to own today. Buying back stock with a near 100% upside to NAV is - if you believe the NAV - a no brainer. I'd go further to say it should be the Board's fiduciary duty to do so at such a discount. How can you approve any other investment out of the company's funds?

[mirfield] 11/8/2022 06:58

Along with other PE Trusts, HVPE mentioned here. 41% discount to NAV. https://www.telegraph.co.uk/investing/shares/investors-looking-bargain-should-stop-ignoring-private-equity/

[riverman77] 21/7/2022 12:27

Wanted to grabbed a few this morning but had already shot up by the time I got back! PIN is now the obvious outlier in the sector on a discount of around 45% (possibly a bit higher if factoring in FX moves). Most of the others now around 35% (ICGT, APEO, NBPE).