Pantheon International has had a “milestone year” – In his introductory comment to Pantheon International (PIN)‘s full report for the twelve months to 31st May 2018, chairman Sir Laurie Magnus noted that the company had celebrated its 30 year anniversary, simplified its capital structure and entered the FTSE 250 index, in what he saw as a milestone year. The company had also issued an asset linked note for £200m, which has had the effect of de‑emphasising the tail of older assets in its portfolio and is expected to boost the NAV per share (for more on the asset linked note see below).
Performance
- NAV per share increased by 10.3%.
- Net assets at 31 May were £1,307m (May 2017: £1,388m), the increase in gross assets being partially offset by the effect of issuing an Asset Linked Note (“ALN”).
- The ordinary share price increased by 12.1% and the discount decreased slightly from 18% to 17%.
The majority of PIN’s portfolio is invested in non-sterling assets, predominantly US dollars and euros, and therefore the NAV per share is susceptible to movements in sterling against those currencies. The impact of currency fluctuations tends to be a less significant factor over the long term.
PIN is an investment company that has a diversified portfolio of other private equity companies. It is currently focused on the mid-market buyout and growth stages of investment, where pricing tends to be lower than at the large end of the market, and which both delivered strong returns during the period. The large buyout funds in PIN’s portfolio also performed well. The company’s venture capital portfolio has been impacted by the weaker performance of its older assets. Special situations, consisting of energy, distressed and mezzanine funds, which had posted a negative performance in the first half of the financial year, recovered in the second half but still underperformed the rest of the portfolio.
Company structure
- Ordinary and redeemable shares were consolidated into a single enlarged class of ordinary shares leading to entry into FTSE 250 index.
- Older assets in the portfolio de-emphasised through issue of £200m ALN.
- £3.5m used to buy back 190,000 ordinary shares.
Outlook from Sir Laurie Magnus, chairman:
“The global economy remained strong during the year, although the outlook appears vulnerable against a backdrop of geopolitical and economic tensions. Pantheon is backing managers that have experience of managing assets through changing market conditions and is focusing on investments with growth potential that is not strictly correlated to GDP growth. In addition, the long-term nature of private equity means that our managers can hold on to their assets until there is a more favourable exit environment.
Valuations in private equity continue to be high, as is the case across equity markets generally and other asset classes, and there are concerns about the growing amount of capital. Private equity managers are having to work harder than ever before to source attractively priced opportunities. The Board and Pantheon are very aware of the importance of navigating the current environment with caution.
PIN offers a simple way for investors to access a well-managed global portfolio of high quality assets, with real potential for outperformance, which are not readily available via the public markets. The Board is confident that Pantheon has the scale, knowledge and expertise, as well as the extensive long-term relationships internationally, that are required to access compelling deals which are often restricted to a selected group of investors. In addition, the Board recognises the strong culture of teamwork and diversity within Pantheon and its long history of investing its clients’ capital responsibly. We believe that these attributes, coupled with a long-term outlook when making investment decisions, play an important role in constructing a high quality portfolio which can maximise long-term capital growth for shareholders.”
More on Pantheon International’s asset linked note:
The £200m unlisted Asset Linked Note (ALN), issued by PIN at the end of October 2017, is due to mature in August 2027. Repayment of the ALN is only made as cash distributions are received from a reference portfolio of older assets. PIP made ALN repayments of £77m during the year and, as at 31 May 2018, the ALN was valued at £132m. Since its issue, the lower relative performance of the reference portfolio underpinning ALN has, as intended, enhanced NAV per share growth in the period.
PIN: Pantheon International has had a “milestone year”