March 2022 Monthly

Pantheon’s 1HFY’22 results confirmed the strong global PE market and the value added by PIN’s ubiquitous platform. The NAV per share grew 22%. Portfolio valuation gains of 19.7% were achieved, with 16%+ valuation gains seen across all regions and investment strategies. The weighted average uplift from fully realised exits was 43% and the average cost multiple on exit realisations was 3.3x. Pantheon’s platform covers the entire market to capture the best opportunities wherever they arise. In 1H’22, these came from primary funds (27% valuation gains, 38% of closing portfolio by type), the US (23% gains, 52% portfolio by geography) and venture/growth (combined 28% of portfolio by stage).

• 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 end-Nov’21, they stood at £658m (end-Jan’22 £645m). At end Nov’21, it had cash of £220m and undrawn credit lines of £300m (with capacity to increase this by £50m). It remains much less over-committed than peers.
• Valuation: PIP shares trade at a 26% 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 end-Dec’21, 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.