HarbourVest Global Private Equity , a diversified listed private equity investment company, could see its share price rise by more than 40%, according to analysts at investment banks Peel Hunt and Jefferies. The closed-ended fund, which trades like a stock with the ticker HVPE on the London Stock Exchange, has investments in high-profile private companies such as Shein, Figma, Databricks, Discord, and ByteDance, the owner of TikTok, among others. It has assets worth nearly $4 billion invested in over 1,000 companies. Richard Hickman, the managing director of HVPE, describes it as the “most diversified, listed private equity investment company in London.” “We don’t have any specific focus, unlike many,” he told CNBC Pro. “We’re a global fully diversified portfolio covering buyout funds, the more established businesses from small cap through medium to large cap.” HVPE-GB 5Y line The fund’s venture capital and growth equity investments comprise 31% of the portfolio and have been the strongest-performing segment in recent years. However, Hickman acknowledged that investor sentiment has faced headwinds since interest rates started rising a few years back. The fund is down 4% this year and has been flat over a three-year period. On a 10-year period, the fund has delivered nearly 10% each year in total returns. Hickman is confident in the fund’s ability to deliver strong returns for investors in the future. Earlier this year, HVPE said 15% of cash realized from its portfolio would be returned to shareholders through share buybacks and special dividends, depending on the share price’s discount to the fund’s net asset value (NAV). NAV represents the value of an investment fund’s assets per share. Shares of HVPE are currently trading at a 43% discount to NAV. In theory, this means that if the fund is liquidated and wound down, the cash returned would be 40% more than the fund’s stock market value at the current time. When the fund performs a share buyback under such a situation, it is buying its own assets at a 43% discount. Analysts at British investment bank Peel Hunt, with an “outperform” rating, said the recent investor-friendly moves “should enhance shareholder returns, reflect best practice in corporate governance and help to narrow the discount” in a note to clients on Feb. 1. Similarly, analysts at Jefferies concluded that HVPE’s new distribution policy “should be able to enhance share price total returns.” They estimate that share buybacks at the current discount could result in a 1.4% uplift in net asset value per share. However, not all analysts are entirely bullish. Analysts at Investec downgraded their rating to “hold” in March, citing concerns about the adequacy of the shareholder distribution policy. “To be candid, we regard a 15% allocation of realisations for buybacks/special dividends as woefully inadequate and several years too late, while a heavily caveated and opaque announcement begs more questions than answers,” said Investec analysts Alan Brierley and Ben Newell. “Just how can a new commitment be a superior and lower risk investment than effectively buying your existing portfolio on a 41% discount?” “As Mr [Warren] Buffett said in his last shareholder letter, the math isn’t complicated,” the analysts continued. “In our view, the introduction of a distribution pool appears rather cosmetic, rather than any bold statement of intent.” Hickman hopes that as the interest rate environment improves in the second half of 2024, the fund will be able to exit some of its investments at currently assumed valuations, which should help lift up its NAV. “If [exits] pick up again, it helps to reassure investors the premium is validating these marks to carrying value once an asset is sold,” he added.
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