HarbourVest needs discount controls
We finish with HarbourVest Global Private Equity (HVPE), a big investment trust that doesn't face questions about its future but which could come under pressure to narrow its discount this year, according to Cade.
Private equity investment trusts invest in unlisted companies that have not floated on the stock market, either directly in the businesses or indirectly through other specialist private equity funds.
HVPE takes the 'fund of funds' route, investing in the private equity funds of its Boston-based manager HarbourVest to give itself a highly diverse exposure to thousands of individual companies.
Like almost all other private equity trusts, HarbourVest shares trade on a big 25% discount to net asset value, which partly reflects the caution investors still feel to a sector that bombed in the 2008 financial crisis.
Performance in the past decade has been good though, and in the past three years HarbourVest has taken steps to make itself more attractive to UK investors. It has moved its listing from Amsterdam to London, adopted a sterling share class (previously it just had dollar-denominated shares) and gave shareholders full voting rights, a series that saw it shortlisted for Citywire's first 'Best Board' award in 2017, although it did not win.
However, the recent widening discounts in the sector as investors worry about the impact of global stock markets on the portfolios, presented the £1.1 billion trust with a problem, said Cade.
The analyst said that unlike many of its rivals HarbourVest had no formal strategy to counter wide discounts.
‘We believe that there will be pressure on these funds to return capital through buybacks/tenders if discounts continue to exceed 20%,’ he said.
‘Most listed private equity funds already have a distribution policy in terms of share buybacks and/or dividends, with the notable exception being HarbourVest Global, which is trading on a 25% discount to its last published NAV at the end of November.’