July 2021 Monthly

PIP is managed very conservatively, which we believe served it well through the 2020 market disruption. On the latest disclosure, nearly uniquely in the sector, its cash/facilities (£478m) largely covered undrawn commitments (£520m), giving a good risk/reward balance. In the 11 May video, Helen Steers expanded on why PIP has chosen technology and tech-enabled businesses as one focus for investment. The discussion also covered ESG, PIP’s COVID-19 resilience, PE returns, PIP’s flexible mandate, and its risk-reward balance. The £33.52 NAV/sh is 85% based off manager December valuations, and peers have reported uplifts when these have been updated.

• April report: The End-Apr’21 report noted valuation gains added 2.2% to NAV and investment income 0.1%. The FX impact was +0.2% and expenses/taxes were -0.1%. PE assets were £1,667m, available resources were cash (£195m) and facilities ($270m, €102m), and undrawn commitments were £520m. The five-year TSR is 109%.
• Recent peer news: Recent activity across PE has been very strong with i) 21 June, ICGT reporting a record quarter for realisations to end-April, ii) 18 June, NBPE reporting 14.7% NAV total return YTD to end-May, iii) 22 June, OCI announcing its third investment in June, and iv) insider buying at OCI and ICGT.
• Valuation: PIP shares trade at a 19% 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 a 14.1% 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.