May 2021 Monthly

The March performance report showed strong NAV progression (up 3.8%), but also indicated a cautious increase in risk appetite. PIP is managed very conservatively, which we believe served it well through 2020 market disruption. At end-February 2021, its cash/facilities largely covered undrawn commitments. Unlike peers, it was not dependent on realisations to fund future drawings. This has been slightly relaxed and, in March, PIP committed $150m to the Pantheon Secondaries Opportunities Fund to take advantage of post-crisis opportunities. Over-commitment as a percentage of NAV remains a fraction of peers, giving a good risk/reward balance.

• March report: The End-Mar’21 report noted valuation gains added 102p to NAV, investment income 3p. The forex impact was +19p, and expenses/taxes were -4p. PE assets were £1,639m, available resources were cash (£183m), facilities ($270m, €102m) with undrawn commitments £531m. The five-year TSR is 113%.
• Strong PE market: PIP operates in the global PE market, which continues to show strong returns. Across the board, there were strong uplifts in NAV, results and realisation gains. Investors’ 2020 concerns about PE appear misplaced (see Just look at PIP’s underlying company resilience) and discounts are reducing.
• Valuation: PIP shares trade at a 18% discount to NAV, despite their long-term outperformance. We believe the “real” NAV is likely to be above the book value on the accounting date, as the company consistently reports uplifts on realisation. PIP re-invests returns for superior capital growth and pays no dividend.
• Risks: We note i) sentiment to the economic cycle (NAV rose every year in the 1990s’ recession and in FY’20), ii) adverse sentiment to illiquid and unquoted investments (PIP has permanent capital and proven exit uplifts), and iii) sentiment to the sustained discount could be an issue. Short term, there can be FX 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. This has delivered 13.4% p.a. NAV total return over the past five years. Corporate governance is strong, and the NAV is conservatively valued. Investors get liquid access to the whole PE market. There are risks around the cycle, and illiquid and unquoted underlying assets, but these, against the historical returns, make the current discount to NAV an anomaly.