Money manager Asset Value Investors (AVI) published an open letter urging Harbourvest Global Private Equity (HVPE) to put itself up for sale. AVI is the activist manager behind the AVI Global (AGT) and MIGO Opportunities (MIGO) trusts.
| HVPE share price: £31.75 | Latest NAV/share: £43.18 |
| Market cap: £2.3bn | Discount: -26.5% |
DISAPPOINTING RETURNS
AVI is a top 10 shareholder in the £2.3 billion cap private equity fund with a 3.3% stake. It says it won’t support HVPE’s continuation vote in July unless the board halts new investments or launches a formal sales process.
In an open letter, AVI manager Tom Treanor said he had held a ‘constructive dialogue’ with the trust’s chair and US fund manager. Treanor co-manages MIGO Opportunities alongside Charlotte Cuthbertson.
Treanor also said he was pleased with recent moves to address a deep, persistent discount to NAV (net asset value). However, a restructuring of the portfolio, increase in share buybacks and decision to sell $300 million of investments were insufficient given HVPE’s poor underlying performance.
Therefore, AVI is ‘firmly of the view that further significant initiatives are necessary and should be explored well ahead of a potentially failed continuation vote’.
Removing the positive impact of buybacks, HVPE’s NAV growth has lagged the FTSE All World index over all time periods up to seven years. Only over a decade has its 129% return come close to the global benchmark’s 130% haul.
Disappointing returns and lack of investor demand are one reason why HVPE shares have persistently traded below the value of its investments, noted Treanor.
In the letter to HVPE’s board, managers and shareholders, Treanor criticised the company’s ‘stretched balance sheet, inaccurate cashflow forecasts, and a lack of material asset sales’ that have hampered proper capital allocation.
Treanor also called out HVPE’s ‘wildly over-optimistic’ forecasts for distributions received from the sale of investments by external fund managers. ‘Despite what appears to be a rigorous process, a comparison of the forecasts to actual outcomes suggests the company has been flying blind for some considerable time’, said Treanor.
ANALYST VIEW
The private equity sector is burdened with poor performance and wide discounts, but the pace of exits is picking up notes QuotedData’s James Carthew. Nevertheless, the jury is out over whether 2026 will be the year the sector goes back to beating the listed global sector as it has over 10 years.
Carthew added: ‘There is also a question mark over whether the sector can win back the professional investors it lost as a result of the cost disclosure mess. In that context, some shrinkage of the sector is inevitable.’
He continued: ‘However, AVI’s proposed solution of seeking a buyer for the portfolio feels too drastic to me. I would prefer that HVPE offered to create a realisation pool for those investors who believe that there is greater upside from narrowing the discount than from a potential return to form for the trust.’
Read the open letter here: https://www.assetvalueinvestors.com/agt/campaign/solutions-for-harbourvest-global-private-equity/
You may also like this story: https://sharesify.com/elon-musks-spacex-drags-on-otherwise-solid-half-year-for-baillie-gifford-us-growth-trust/
Disclaimer: This content is for information only and is not investment advice. Always do your own research before investing. Click here to see full disclaimer.
