March 2020 Monthly

We reviewed PIP in our initiation report, published on 6 September 2019, and in our note, History of value added to portfolio by holding Pantheon, published on 26 November 2019. The core messages in the interim results confirmed the reasons why PIP has delivered sustained market-beating returns (11.6% annualised NAV growth since inception): i) PE-owned businesses outperforming quoted ones; ii) PIP is investing in the right PE subsectors; iii) Pantheon family benefits; iv) good manager selection; v) sustained uplift to book value on sale, giving confidence in the NAV; and iv) a flexible, diverse fund.

• Interim results: NAV rose 5% (constant currency basis, +1% after forex impact of -4%). PIP’s share price outperformed the FTSE All Share by 2%. Sale proceeds were £123m (annualised 18% of opening portfolio). Calls were £59m. Net cash inflow was £64m and net cash £153m. £80m commitments were made.
• Peer news: On 18 February, Harbourvest announced that its NAV had been flat at $26.92 during January. On 14 February, SLPE reported a monthly NAV fall of 7.8p to 431p. ICG Enterprise Trust, on 23 January, announced a three-month to October NAV fall of 2.5% to 1,140p (forex-driven).
• Valuation: After recent stock market falls, PIP trades at an 18% discount to NAV, despite its record of outperformance outlined above. We believe the “real” PIP NAV is likely to be above the accounting value, making the discount even higher. PIP reinvests returns for superior capital growth, and does not pay a dividend.
• Risks: Sentiment to the economic cycle is material (PIP’s NAV rose every year in the early 1990s’ recession). Even though PIP has permanent capital and proven uplifts on exit, market sentiment towards investments with illiquid and unquoted shares is adverse. Forex movements can 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.