Standard Life Private Equity Trust (SLPE) has announced its final results for the year ended 30 September 2018. During the year, the trust provided Nav and share price total returns of 13.8% and 5.8% respectively. The superior Nav performance reflects a widening of the trust’s discount during the period. In comparison, SLPE says that the MSCI Europe Index provided a total return of 3.2% over the same period. The results also confirm a new investment team and proposals for a change in investment policy to allow direct investment (see below).
NAV development
SLPE says that, as at 30 September 2018, its net assets were £661.4 million (30 September 2017: £599.0 million). The NAV per ordinary share rose 10.4% over the year to 430.2 pence (30 September 2017: 389.6 pence). It says that this increase comprised 9.5% of net realised gains and income from the Company’s portfolio of 55 private equity fund interests, 4.1% of unrealised gains on a constant exchange rate basis and 1.0% of positive exchange rate movements on the portfolio. This wa partially offset by 1.1% of other items, fees and costs as well as by 3.1% of dividends paid during the year.
Performance driven by a positive flow of realisations
SLPE says that its performance during the year was driven by a positive flow of realisations as businesses are sold by the managers of the underlying funds that make up SLPE’s portfolio. Its says that, in the year to 30 September 2018, these realisations totalled £127.9 million compared with £130.7 million in the previous year. Against this, £111.6 million was drawn down from the Company’s resources to fund new and existing investee companies and secondary investments. This compares with £114.2 million for the prior year. It says that the net effect of these cash flows was that, as at the end of September 2018, the Company had resources available for investment of £86.5 million (30 September 2017: £93.6 million).
Increasing the manager’s opportunity set – looking to direct investment
Following an in-depth strategic review, the Board says that it has concluded that it would be beneficial to increase the opportunity set available to the Manager, by broadening SLPE’s investment objective and policy. The board proposes that SLPE be allowed to make direct investments into private companies alongside private equity managers (sometimes referred to as co-investments). Its says that these would mainly be alongside managers of private equity funds which SLPE and/or Aberdeen Standard Investments has invested in. The board says that direct private equity investments have multiple potential benefits, including:
- the ability to generate outsized returns versus fund investments;
- lower fees;
- providing increased exposure to particularly attractive assets; and
- the opportunity to put more capital to work.
The Board is therefore asking shareholders to approve amendments to the investment objective and policy to allow direct investment.
New investment team
SLPE has announced that Merrick McKay, Alan Gauld and Patrick Knechtli will now form the Manager’s key investment team with regard to SLPS, with support coming from the rest of Aberdeen Standard Investments’ Private Equity team, as before.
Five new fund commitments made during the year
Five new fund commitments during the year. These comprised commitments of €30.0 million each to PAI Europe VII, Equistone Partners Europe Fund VI and Bridgepoint Europe VI, €25.0 million to Investindustrial Growth and $21.5 million to MSouth Equity Partners IV.
SLPE also acquired two positions in the secondary market, acquiring commitments in Onex Partners IV and Nordic Capital Fund VIII. As a result of these investment activities, at 30 September 2018, the Company had total outstanding commitments of £369.3 million, compared with £325.6 million a year earlier, while the portfolio of 55 private equity fund interests was valued at £574.7 million (30 September 2017: 51 funds valued at £503.7 million).
Dividend increasing by 0.45p to 12.4p per share
SLPE’s Board has proposed a final quarterly dividend for the year ended 30 September 2018 of 3.1p per share, to be paid on 25 January 2019 to the shareholders on the Company’s share register at 21 December 2018. This final quarterly dividend, together with the previous quarterly dividends each of 3.1p per share, totals 12.4p per share (2017: 12.0 pence per share).
Outlook
SLPE’s board says that the outlook for the global private equity market remains competitive, with significant amounts of funds being raised. It says that the managers of many funds that SLPE is invested in, continue to report positive earnings growth across their portfolio of investee companies. The board also says that SLPE continues to benefit from strong levels of exit activity, and absent any major shocks, the Manager expects this to continue over the course of the next year. It says that such exit activity should result in further realised gains being generated.