HarbourVest Global Private Equity (HVPE), the £2.1bn private equity fund investor under pressure from activists Asset Value Investors and Saba, has agreed to hold a $400m (£296m) tender offer in the autumn to secure support for its first continuation vote in July.
The proposed tender offer is bigger than the landmark £150m tender made by rival Pantheon International (PIN) in 2023. It will let shareholders sell shares at around 10% below net asset value (NAV) compared to the current 30% discount. It follows HVPE’s announcement in December to sell $300m (£224m) of fund investments from its then $4.6bn portfolio.
The shares rose 3.4%, or 102p, to £31.27, narrowing the gap to NAV.
Combined with ongoing share buybacks, HVPE aims to return $500m to shareholders this year, or 12% of assets. This will double to $1bn (£740m) by the time of a second continuation vote, which it has promised to hold by July 2029, as the board has also committed to distribute 5-10% of NAV annually up to that point.
HVPE was the first listed private equity fund of funds in the UK last year to offer a continuation vote, which analysts now expect it to pass. It said the new pledge to hold a second ballot would ensure shareholders “have an opportunity to reflect on the success of the company”.
The company also said it would make no further investment commitments this year to ensure there was sufficient cash for buybacks and the tender offer. Its existing investment commitments are significant at $540m.
Chair Ed Warner said: “HVPE shares are near an all-time high but currently trade on a wide discount to NAV. We believe the initiatives announced today represent a bold step forward in narrowing that gap and enhancing returns for shareholders. The scale of the tender offer we are launching is unprecedented in our sector, and it reflects the confidence we have in HVPE’s ability to generate liquidity. The board continually assesses a wide range of strategic options to enhance shareholder value, and these initiatives reflect the board’s commitment to a closer correlation between the company’s NAV and share price.”
Saba, the US hedge fund threatening to take control of Edinburgh Worldwide (EWI), Herald (HRI) and Impax Environmental Markets (IEM), disclosed a 5% stake in HVPE in February.
AVI holds 3.3% mostly through AVI Global Trust (AGT). In January it published an open letter calling for HVPE to start a formal sale process or gradual wind-down, criticising its performance with the underlying investment return at the time having lagged the FTSE All-World index over all time periods up to seven years.
HVPE subsequently pointed out that its share price had risen 18% last year, ahead of 11% growth in its investments and building on a 13% increase in 2024. It said the discount had narrowed to 27% from 37% in response to the doubling in the distribution pool, the simplification of its investment structure using separately managed accounts and the introduction of the continuation vote.
With its investments mostly in funds run by Boston-based HarbourVest Partners, HVPE is 62% invested in North America with 24% in Europe and 16% in Asia Pacific. Half of the portfolio is in “primary” funds where it invested at launch, 30% in “secondaries” where it bought a stake off another investor, and 20% where it co-invests directly in unquoted firms with HarbourVest, but outside a fund, thereby saving the management fee.
According to Winterflood data, HVPE sits in the middle of a five-strong group of private equity fund of funds. Over five years its 68% total underlying investment return ranks behind CT Private Equity (CTPE) on 79% and Patria Private Equity (PPET) on 71%, but ahead of ICG Enterprise (ICGT) on 64% and Pantheon (PIN) on 59%. The wide gap, or discount, between its shares and the net asset value of its investments means shareholders’ actual return was 20% lower at 48%, however.
HVPE’s 30% discount is slightly lower than the weighted average of its peer group and is narrower than the near 34% average of the past year.
The company is holding a webinar for investors at 3pm today. You can register here.
Our view
James Carthew, head of investment company research at QuotedData, said: “Discounts in the private equity sector are too wide and returns over the last few years have been lacklustre. Investors have been demanding action and, having introduced a continuation vote, HarbourVest Private Equity is trying to step up. However, I cannot help wondering if the pendulum is swinging too far in favour of focusing on discount control. No new investments this year and much constrained new investments in subsequent years (only after 5%–10% of NAV has been set aside each year to fund distributions) could hamstring the trust’s ability to drive its NAV returns for the foreseeable future. HVPE has a long-term track record that stacks up against global equity investment trusts as well as private equity peers. I am not sure I can see the point of remaining invested in a trust that wasn’t seeking to maintain that.”
Stay a step ahead. Our daily newsletter brings you the latest on investment trusts and active ETFs. Subscribe here.