Private Equity has been friendless for some time however the sector figured large amongst our best performers during April notably NB Private Equity and Oakley Capital. Investors had been fearing significant write downs (reduction in the value of assets) however they did not materialise. Audited numbers for the December year end appear to be giving investors comfort.
The position in NB Private Equity Partners (NBPE) was fully exited towards the end of the month. Over the six-year holding period, our investment in NBPE generated an excellent IRR of +18% (in GBP; 14% in USD).
Just after month-end, NB Private Equity Partners (NBPE) also announced a
share buyback programme along with the sale of a portion of its legacy third
party funds interests. We have been keen to see the company take this step
for some time now, although the key question is of course how aggressive (or
not) this programme proves to be in practice. As a long-term shareholder of
NBPE (our first investment was made in early 2013), we have benefitted from
outstanding NAV performance and, as with TPOU, the company today is in
far better shape than it was before our arrival. Measures introduced over our
holding period include the introduction of full voting rights that accompanied a
move to a Premium listing; a reduction in the number of non-independent
directors from two to one; greater clarity on the dividend policy (now set at a
minimum 3% of NAV with an upwards bias); as well as the recent sale of a
part of the legacy funds portfolio, and the announcement of the buyback
programme as referred to above.
NB Private Equity’s discount continued to grind tighter ahead of the
inclusion of its shares in the FTSE indices, while Better Capital announced
an expected completion date for the sale of key asset Gardner Aerospace
that was subsequently met in June. Pargesa posted a solid return over the
month, aided by a tightening discount and NAV growth on the back of
strong returns at underlying holdings Pernod-Ricard, LafargeHolcim, and
SGS. Tetragon and Investor’s returns were helped by narrowing discounts.
Towards the end of the month, NB Private Equity Partners (NBPE) made the
long-awaited announcement that it will put forward proposals to introduce
full voting rights on its shares, upgrade its listing (currently a dual listing on
Euronext and London’s Specialist Fund Market) to the Premium segment of
the London Main Market, and change the traded currency of its shares from
USD to GBP to allow index trackers to purchase stock. As the company’s
second largest shareholder with a 10% stake, we have consistently urged
the management and board of the company to make these important
changes and are gratified to see not only that these are finally being
implemented but that the chosen method by which key technical issues will
be addressed is particularly appealing compared to other companies that
have made the same move. The additional buying interest from indextrackers
and closet trackers should help narrow the discount in the shortterm,
and the shares will now be investible for institutions previously unable
or unwilling to consider investing in a company where shareholders were unenfranchised.
Issues surrounding the manager’s right to appoint directors
remain to be resolved (and indeed can be once enfranchisement is
complete), but by far the most important first step has been made. At the
same time as this announcement, NBPE published its final results that
confirmed a NAV return of almost 15% in USD (29% in GBP) for 2016,
ranking the company third out of the twenty London-listed private equity
funds. While the 15% discount is narrower than it was, we still see a “fair”
discount as being materially tighter.
Continued discount narrowing (19.5% to 16.2%) saw NB Private Equity add
40bps to BTEM’s NAV. The company announced the appointment of a new
advisor to assist with the strategic review of its corporate governance and
listing structure, and pledged to provide a further update “in the near
future”. Our view, expressed consistently to the management and board
over the duration of our investment, is that a full enfranchisement of
shareholders and a Premium London listing are essential steps to take if the
company is to enjoy the higher rating we believe it otherwise merits.
NB Private Equity Partners’ discount continued to grind tighter with NAV
growth aided by an IPO of its top holding, an equity co-investment in
Extraction Oil & Gas (XOG) made alongside Yorktown Partners. XOG, which
owns land in the Colorado DJ Basin, accounted for 2.7% of NBPE’s NAV
prior to its listing which came at a price equating to a near-70% uplift over
carrying value. XOG then traded up further with the share price at monthend representing an 86% increase over carrying value. Aside from the
obvious benefit of an increase in NAV, this transaction also serves to
highlight the conservative nature of valuations in NBPE’s portfolio.
XOG’s listing was the first IPO of a US E&P company in two years, and was
12x oversubscribed. This shows there is pent-up demand for those select
E&P operators active in low-cost basins who are able to achieve positive
returns from drilling at current spot prices. Riverstone Energy’s portfolio,32% exposed to the Permian Basin and 39% to Western Canada, is
particularly well placed to benefit from this demand. Riverstone’s Q3
portfolio valuations saw significant write-ups in its Three Rivers holding
(Permian Delaware Basin, +124%) and in its largest position, CIOC
(Western Canada, +34%) for a 13% increase in NAV over Q3 (16% in
GBP).
NB Private Equity Partners (NBPE) was our second largest contributor on
the back of a substantial tightening of its discount (28% to 22%), a small
increase in NAV, and strong USD vs GBP (+1.3%). We believe the bid for
SVG Capital by Harbourvest in the first half of the month should serve as a
wake-up call to the boards of funds in the sector. It is not sufficient, in our
view, for individual boards to use the sector’s wide discount as justification
for inaction on tackling their own fund’s discount. The bid for SVG Capital
and subsequent interest from other potential buyers confirms the value on
offer in the sector, which has been evident for some time in the gap between
discounts in the secondary market for LPs and in the listed sector: 6%
(source: Cogent) vs 24% at H1-16. While attention drawn by the bid
sparked a partial re-rating of the entire sector (average discount in by
340bps excluding SVG Capital), NBPE outperformed for stock-specific
reasons. The successful refinancing of the company’s existing ZDPs at a
much more attractive rate (4% GRY vs 7.3%) improves the cost and tenor of
the leverage in place, while the accompanying management roadshow in
connection with the new ZDP offering was helpful in raising the profile of the
company. We continue to believe that the enfranchisement of shareholders
and restructuring of the company’s listing are critical if NBPE is to achieve
the rating its differentiated portfolio and strong track record deserve, and we
continue to impress this point upon the Board and Management.
The content of this website is issued by Asset Value Investors Limited (“AVI”), 2 Cavendish Square, London W1G 0PU. AVI is authorised and regulated by the Financial Conduct Authority of the United Kingdom (the “FCA”) and is a registered investment adviser with the Securities and Exchange Commission of the United States. While the Investment Manager is registered with the SEC as an investment adviser, it does not comply with the Advisers Act with regard to its non-U.S. clients.
To the extent that material on this website is issued in the UK, it is issued for the purposes of the Financial Services and Markets Act 2000
Intended Audience
The information on this website is provided to you for informational purposes only and should not be regarded as an offer or solicitation of an offer to buy or sell any investments or related services that may be referenced on this website. The information on this website is subject to change without notice.
It is your responsibility to observe all applicable laws and regulations of any relevant jurisdiction.
This website is primarily intended for United Kingdom (“UK”) residents. It is not intended for distribution to, or use by, any U.S. persons or persons in any other country where such distribution, publication or use would be contrary to local law or regulation or in which AVI does not hold any necessary licence or registration. Individuals or entities in respect of whom such prohibitions apply, must not access or use the AVI website.
No Tax or Legal Advice
Nothing on this website constitutes investment, legal, tax or other advice nor should it be relied upon in making an investment decision.
Money Laundering
As a result of money laundering regulations, additional documentation for identification purposes may be required when you make your investment. Full details are contained in the relevant subscription documents.
Investment Decisions
As with all financial or investment matters, you should exercise great care in using the information provided on this website or available through links from this website. You should research the facts, opinions and strategies mentioned in this website before making any financial investment decisions. If you are unsure about the meaning of any information provided please consult your financial adviser or other professional adviser.
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Whilst all reasonable care has been taken in the preparation of this website, AVI cannot guarantee the accuracy or completeness of such information, either expressly or implied.
Neither AVI, any of its directors, officers or employees, nor any third party vendor, will be liable or have any responsibility of any kind for any loss or damage that you incur in the event of any failure or interruption of this site, or resulting from the act or omission of any other party involved in making this site or the data contained therein available to you, or from any other cause relating to your access to, inability to access, or use of the site or these materials, whether or not the circumstances giving rise to such cause may have been within the control of AVI, or of any vendor providing software or services support.
All information and content on this website is, subject to applicable statutes and regulations, furnished “as is”, without warranty of any kind, express or implied, including but not limited to implied warranties of merchantability, fitness for a particular purpose or non-infringement. We make no warranty as to the operation, functionality or availability of this website, that the website will be error-free or that defects will be corrected.
In no event shall AVI be liable to any indirect, incidental, special or consequential damages arising out of or in connection with the use of this website, the inability to use this site or any products or services obtained or stored in or from this website, whether based on contract, tort, strict liability or otherwise. These limitations also apply to any third party claims against users.
Intellectual Property
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Copyright Policy
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Hyperlinks
The existence of hyperlinks should not be construed as an endorsement, approval or verification by AVI of any content available on third party sites. By providing access to other websites, we are not recommending the purchase or sale of products or services provided by the website’s sponsoring organization. We do not review any of these third party sites. AVI reserves the right to require written consent for, or request the removal of, any links to our website.
AVI disclaims all responsibility and liability for the content on third party sites.
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For your protection, we require the use of encryption technologies for certain types of communications conducted through this website. While we provide those technologies and use other reasonable precautions to protect confidential information and provide suitable security, we do not guarantee or warrant that information transmitted through the Internet is secure, or that such transmissions will be free from delay, interruption, interception or error. You acknowledge and agree that users of this website and users, owners, or managers of third party websites may not: (i) collect or store personal data about other users of this website or (ii) upload, e-mail or otherwise transmit any material that contains viruses or any other computer code, files or programs that might interrupt, limit or interfere with the functionality of any computer software, hardware, database or file, or communications equipment that is owned, leased or used by AVI.
Privacy Policy
We encourage you to read AVI’s Privacy Policy which can be obtained by clicking the Privacy Policy button found on the Homepage.
General Terms
Deliberate misuse of any element of this website including, without limitation, hacking, introduction of viruses or similar code, disruption or excessive use or any use in contravention of applicable law, is expressly prohibited and we reserve the right to terminate your access to the website, and at our discretion, pass information to the legal authorities.
We reserve the right at any time on giving notice to change or modify these terms and conditions or to impose new conditions in respect of this website or to change or discontinue any aspect or feature of this website. We shall be entitled to terminate your access to this website at any time on giving notice to you and in any event if you commit any breach of these terms and conditions. We shall have no liability to you for such termination. Notices may be served by any reasonable method including posting on this website.
You shall indemnify us from and against all actions, claims, proceedings, costs and damages (including any damages or compensation paid by us on the advice of its legal advisors to compromise or settle any claim) and all legal costs or expenses arising out of your use of this website, any breach of any applicable law, statute, ordinace, regulation or third party rights and any breach by you of the software licenses and service agreements governing the software made available to you in connection with this website.
These terms and conditions shall be governed by and construed in accordance with the laws of England without regard to conflicts of law principles. Nothing in these Terms and Conditions will exclude or restrict any duty or liability we may have under applicable rules or regulations.
AVI Global Trust – General Risk Factors
AVI Global Trust plc is a public company listed and traded on the London Stock Exchange. Past performance should not be seen as an indication of future performance. The price of investments and the income from them may fall as well as rise and investors may not get back the full amount invested. The trust uses gearing techniques (leverage) which will exaggerate market movements both down and up which could mean sudden and large falls in market value. Please refer to the Key Features Document for further details effecting your investment.
Applications to invest in AVI Global Trust referred to on this website, must only be made on the basis of the current Key Features Document, or other applicable terms and conditions. Past performance should not be seen as an indication of future performance. Market and exchange rate movements may cause the value of a fund to rise or fall and an investor may not get back the amount invested.
As a result of money laundering regulations, additional documentation for identification purposes may be required when you make your investment. Details are contained in the relevant application documents.
If you are unsure about the meaning of any information provided please consult your financial adviser or other professional adviser.
By agreeing to these terms, you agree that we may contact you by post, fax, email, SMS messaging or by other forms of electronic media to inform you of our products and services that we believe you might be interested in.
The content of this website is issued by Asset Value Investors Limited (“AVI”), 2 Cavendish Square, London W1G 0PU.
AVI is authorised and regulated by the Financial Conduct Authority of the United Kingdom (the “FCA”) and is a registered investment adviser with the Securities and Exchange Commission of the United States. While the Investment Manager is registered with the SEC as an investment adviser, it does not comply with the Advisers Act with regard to its non-U.S. clients.
Intended Audience
The information on this website is provided to you for informational purposes only and should not be regarded as an offer or solicitation of an offer to buy or sell any investments or related services that may be referenced on this website.The information on this website is subject to change without notice.
This website is primarily intended for UK residents. It is not intended for distribution to, or use by, any U.S. persons or persons in any other country where such distribution or use would be contrary to local law or regulation.
It is your responsibility to observe all applicable laws and regulations of any relevant jurisdiction.
No Tax or Legal Advice
Nothing on this website constitutes investment, legal, tax or other advice nor should it be relied upon in making an investment decision.
Money Laundering
As a result of money laundering regulations, additional documentation for identification purposes may be required when you make your investment. Full details are contained in the relevant subscription documents.
Investment Decisions
As with all financial or investment matters, you should exercise great care in using the information provided on this website or available through links from this website. You should research the facts, opinions and strategies mentioned in this website before making any financial investment decisions. If you are unsure about the meaning of any information provided please consult your financial adviser or other professional adviser.
No Warranty; Limitation on Liability
Whilst all reasonable care has been taken in the preparation of this website, AVI cannot guarantee the accuracy or completeness of such information, either expressly or implied. Neither AVI, any of its directors, officers or employees, nor any third party vendor, will be liable or have any responsibility of any kind for any loss or damage that you incur in the event of any failure or interruption of this site, or resulting from the act or omission of any other party involved in making this site or the data contained therein available to you, or from any other cause relating to your access to, inability to access, or use of the site or these materials, whether or not the circumstances giving rise to such cause may have been within the control of AVI, or of any vendor providing software or services support.
All information and content on this website is, subject to applicable statutes and regulations, furnished “as is”, without warranty of any kind, express or implied, including but not limited to implied warranties of merchantability, fitness for a particular purpose or non-infringement. We make no warranty as to the operation, functionality or availability of this website, that the website will be error-free or that defects will be corrected.
In no event shall AVI be liable to any indirect, incidental, special or consequential damages arising out of or in connection with the use of this website, the inability to use this site or any products or services obtained or stored in or from this website, whether based on contract, tort, strict liability or otherwise. These limitations also apply to any third party claims against users.
Intellectual Property
Everything on this website is the valuable intellectual property of Asset Value Investors Limited, or their respective suppliers. We protect our intellectual property rights to the full extent of the law.
Copyright Policy
No permission is granted to copy, distribute, modify, post or frame any text, graphics, video, audio, software code, or user interface design or logos.
Hyperlinks
The existence of hyperlinks should not be construed as an endorsement, approval or verification by AVI of any content available on third party sites. By providing access to other websites, we are not recommending the purchase or sale of products or services provided by the website’s sponsoring organization. We do not review any of these third party sites. AVI reserves the right to require written consent for, or request the removal of, any links to our website.
AVI disclaims all responsibility for the content of third party sites
Security
For your protection, we require the use of encryption technologies for certain types of communications conducted through this website. While we provide those technologies and use other reasonable precautions to protect confidential information and provide suitable security, we do not guarantee or warrant that information transmitted through the Internet is secure, or that such transmissions will be free from delay, interruption, interception or error.
You acknowledge and agree that users of this website and users, owners, or managers of third party websites may not: (i) collect or store personal data about other users of this website or (ii) upload, e-mail or otherwise transmit any material that contains viruses or any other computer code, files or programs that might interrupt, limit or interfere with the functionality of any computer software, hardware, database or file, or communications equipment that is owned, leased or used by AVI.
Privacy Policy
We encourage you to read AVI’s Privacy Policy which can be obtained by clicking the Privacy Policy button found on the Homepage.
General Terms
Deliberate misuse of any element of this website including, without limitation, hacking, introduction of viruses or similar code, disruption or excessive use or any use in contravention of applicable law, is expressly prohibited and we reserve the right to terminate your access to the website, and at our discretion, pass information to the legal authorities.
We reserve the right at any time on giving notice to change or modify these terms and conditions or to impose new conditions in respect of this website or to change or discontinue any aspect or feature of this website. We shall be entitled to terminate your access to this website at any time on giving notice to you and in any event if you commit any breach of these terms and conditions. We shall have no liability to you for such termination. Notices may be served by any reasonable method including posting on this website.
You shall indemnify us from and against all actions, claims, proceedings, costs and damages (including any damages or compensation paid by us on the advice of its legal advisors to compromise or settle any claim) and all legal costs or expenses arising out of your use of this website, any breach of any applicable law, statute, ordinace, regulation or third party rights and any breach by you of the software licenses and service agreements governing the software made available to you in connection with this website.
These terms and conditions shall be governed by and construed in accordance with the laws of England without regard to conflicts of law principles. Nothing in these Terms and Conditions will exclude or restrict any duty or liability we may have under applicable rules or regulations.
AVI Global Trust – General Risk Factors
AVI Global Trust plc is a public company listed and traded on the London Stock Exchange.
Past performance should not be seen as an indication of future performance. The price of investments and the income from them may fall as well as rise and investors may not get back the full amount invested. The trust uses gearing techniques (leverage) which will exaggerate market movements both down and up which could mean sudden and large falls in market value. Please refer to the Key Features Document for further details effecting affecting your investment.
Applications to invest in AV Global Trust referred to on this Site, must only be made on the basis of the current Key Features Document, or other applicable terms and conditions. Past performance should not be seen as an indication of future performance. Market and exchange rate movements may cause the value of a fund to rise or fall and an investor may not get back the amount invested.
As a result of money laundering regulations, additional documentation for identification purposes may be required when you make your investment. Details are contained in the relevant application documents. If you are unsure about the meaning of any information provided please consult your financial adviser or other professional adviser.
By agreeing to these terms, you agree that we may contact you by post, fax, email, SMS messaging or by other forms of electronic media to inform you of our products and services that we believe you might be interested in.
INVESTOR – Risk Warnings
It is very important that you read this warning and disclaimer before proceeding, as it explains certain legal and regulatory restrictions applicable to any investment services and products we provide.
The content of this website is issued by Asset Value Investors Ltd (“AVI”), 2 Cavendish Square, London W1G 0PU
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This website is not directed at any person in any jurisdiction where it is illegal or unlawful to access and use such information. AVI disclaims all responsibility if you access any information in breach of any local law or regulation. All persons who access this website are required to inform themselves and to abide with all applicable local law, regulations and restrictions.
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The funds noted in this website may be subject to higher risk and volatility than other funds and may not be suitable for all investors. These funds are not regulated.
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We reserve the right at any time on giving notice to change or modify these terms and conditions or to impose new conditions in respect of this website or to change or discontinue any aspect or feature of this website. We shall be entitled to terminate your access to this website at any time on giving notice to you and in any event if you commit any breach of these terms and conditions. We shall have no liability to you for such termination. Notices may be served by any reasonable method including posting on this website.
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