November 2022 Monthly

We reviewed PIN’s results in our note, FY’22 results: it is not just lionesses that roar. In summary, FY’22 was a record year for PIN in terms of NAV growth, cash generation and investment activity, with 31% NAV growth net of all fees. Uplifts on exit averaged 42%, proving the conservatism of the valuation approach. This performance followed outperformance over the previous 34 years through multiple cycles, and NAV has continued to grow since then, despite the recent economic challenges (from 452p NAV per share to 492.5p). NAV and disposal announcements across the PE industry have continued to be robust, which bodes well for PIN.

• Investor presentation: Helen Steers provided a live presentation on PIN and the PE sector on 28 September 2022. Investors can see it in the archived section of Pantheon’s page, on www.investormeetcompany.com/. The presentation reiterated the growth and resilience that we have outlined in previous reports.
• Resilient outlook: We believe PE, and PIN, should prove resilient to challenging economic conditions, noting the incremental operational, strategic and financial value PE adds to investee companies. PIN invests in resilient sectors and mature/profitable companies, with just 4% venture exposure. Portfolio gearing is modest. We note the large NAV outperformance in previous downturns.
• Valuation: PIN shares trade at a 49% discount to NAV, despite their long-term outperformance. We believe the “real” NAV is likely to be above the book value, given the uplifts to carrying value achieved on exits. PIN consistently sees material uplifts on exit realisations. Steady buybacks are currently being done.
• 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 (PIN has permanent capital and proven exit uplifts), and iii) that sentiment to the sustained discount could be an issue. Short term, there can be FX volatility.
• Investment summary: PIN 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 September 2022, this delivered 12.5% 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.