April 2022 Monthly

Our note, 1H strong performance, actively managed portfolio, published on 4 March, reviewed PIN’s 1H results. We believe the key message is how Pantheon’s platform allowed it to capture the best PE opportunities wherever they arose. With ca.45% of the portfolio made directly into companies, and an increasingly selective choice of manager, PIN offers investors a focused, but global, exposure to a very strong PE market. The NAV per share grew 22% in just six months. Portfolio valuation gains of 19.7% were achieved, with 16%+ gains seen across all regions and investment strategies. The weighted average uplift from fully realised exits was 43%, and the average cost multiple was 3.3x.

• Cash generation: PIP was again strongly cash-generative. Distributions received during the half year were £198m, equivalent to a distribution rate of 24% of the opening attributable portfolio. After funding £77m of calls, the net cash inflow from the portfolio was £121m. End cash balances were £220m.
• Commitments: PIP steadily raised its commitments coming out the pandemic and, at the end of November 2021, they stood at £658m (end-Feb’22 £649m). At the end of November 2021, PIP had cash of £220m and undrawn credit lines of £300m (with capacity to increase this by £50m). It remains much less over-committed than its peers.
• Valuation: PIP shares trade at a 25% 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, given the market rises and uplifts to carrying value achieved on exits. PIP consistently sees material uplifts on exit realisations.
• 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 and deal selection, and portfolio structuring, add value. To the end of February 2022, this delivered 12.2% annual NAV growth since inception in 1987. Corporate governance is strong, and the NAV is conservatively valued. Investors get liquid access to the global PE market. There are risks around the cycle, and illiquid and unquoted underlying assets. The discount appears anomalous with risk-adjusted returns.