August 2020 Monthly

The 23 July announcement noted that, in June, the NAV fell 0.6%, driven primarily by valuation losses. End-June net available cash balances were £121m, and the undrawn loan facility was £311m, giving total available finance of £432m. Total outstanding commitments (including those outside their investment period, which are less likely to be drawn) were £533m. Realisations in the month were £12m. In terms of outlook, the company commented, “Although the company made no new commitments during the month, PIP's pipeline points to an active period for new commitments in the second half of 2020.”

• Portfolio mix: The June newsletter noted that the two largest sectors were IT 25% and Healthcare 21%. By stage, it is 41% small/mid-buyout, 26% large/mega buyout and 20% growth. By type, it is 36% secondary, 35% co-investments and 29% primary and, by region, US 50%, Europe 31%, Asia/EM 12% and global 7%.
• Peer news flow: Harbourvest’s June NAV noted a broadly flat NAV over the month (£20.70 vs. £20.79) and that it was a modest net investor ($9m) in the month. Its portfolio has a more primary bias. SLPE’s June factsheet noted a 6% NAV reduction over six months (2% over one year), with a lower Healthcare/IT bias.
• Valuation: PIP trades at a 25% discount to NAV, which includes the conservative manager’s provision. In our initiation report, we noted why PE has historically outperformed quoted markets in downturns. The discount is despite its long-term record of outperformance. PIP aims for capital growth (no dividend).
• Risks: Sentiment to the economic cycle and private investments is material (noting PIP’s NAV increased every year in the early 1990s’ recession). PIP has conservative accounting/liquidity policies. Forex movements create short-term volatility.
• Investment summary: PIP is in an attractive market, can pick the best part of that market, and has competitive operational advantages. Its manager selection and portfolio structuring have added value. Corporate governance appears strong, and the “real” value of the assets is, we believe, above their accounting value. Investors are getting liquid access to the whole PE market. There are risks around the cycle, and illiquid and unquoted underlying assets; however, comparing these with the historical returns makes the current discount an anomaly, in our view.