March 2021 Monthly

PIP’s 25 February results (to end-November) confirmed all the trends we expected. PIP is a well-funded, globally diversified investor in PE funds, whose flexible mandate means it can outperform in downturns, and re-investment returns immediately post a crisis appear attractive, with a strong recovery in PE markets in 2H’20. With £423m of available finance at end-January 2021, Pantheon is well positioned to exploit this opportunity. Realisations through 2020 have remained relatively robust, and PIP continues to adopt highly conservative policies on liquidity/over-commitment, offering investors long-term returns in line with peers but at lower risk.

• End January 2021 Performance report: In January, valuation gains added 23.6p and investment income 1.5p. The forex impact was -17.9p, and expenses/taxes were -3.9p. PE assets were £1,584m, total available resources were £423m, and undrawn commitments were £427m. The five-year TSR is 90%.
• Peer news flow: On 17 February, NBPE reported a 4.6% total NAV return, as it rolled forward investments (52% to December/January basis, vs. 1% at PIP). On 12 February, SLPE reported a 1.8%, 8.9p fall in NAV for the month – 3.3p was due to dividends and the balance forex; it is still 99% based off September valuations.
• Valuation: PIP shares trade at a 20% 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 11.6% annual NAV growth since inception. 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.