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QuotedData feedback on Harbourvest Private Equity meeting

Harbourvest Global Private Equity US dollar quote

QuotedData feedback on Harbourvest Private Equity meeting

From time-to-time, QuotedData’s analysts meet a wide range of companies that aren’t clients for our sponsored research service. We figured it made sense to share some of our thoughts on these companies with you. So, in the first of a series of ad hoc reports, here are some observations on Harbourvest Private Equity from QuotedData’s Shonil Chande.

HarbourVest global private equity (HVPE) hosted a capital markets session yesterday at the Sofitel hotel in London.

HVPE is a FTSE 250 constituent with an asset base of $2bn that is invested across over a thousand material exposures. Investments cover early ventures through to large-cap buyouts and are accessed through a mix of primary, secondary and co-investment strategies. HVPE is managed by HarbourVest Partners and is its sole listed vehicle. The manager oversees commitments worth more than $40bn globally.

The event was organised for stakeholders in HVPE and well attended. Sir Michael Bunbury,   chairman for the past 11 years, began proceedings with an overview of HVPE, its manager and the wider industry. Sir Michael will be stepping down following HVPE’s AGM in 2020 – he has been chairman since the closed-end company’s IPO in 2007.

Richard Hickman, director of investment and operations at HVPE, followed with a ‘year in review’ presentation. The session was interactive with regular polling from the audience. The polling showed more than half the audience did not own HVPE. Key takeaways include:

  • HVPE has delivered ten successive years of NAV growth. NAV growth of 12.3% in USD terms over the year to 31 January 2019 and a share price increase of 13.9%. Direct co-investing was the best performing strategy. Total new commitments made over the year were $730m;
  • It has outperformed the FTSE all world total return index by 3.8% on a NAV total return basis since its inception in 2007;
  • HarbourVest Partners invests in about 5-7% of the opportunities it is presented with across primary, secondary and direct investment strategies;
  • In an environment where young companies are staying private for much longer and interest in listed exposure to such opportunities is at an all-time high, particularly as public markets are unlikely to perform as well as they have done going forward, Richard discussed the important of getting the HVPE story out into the wider media more. He cited the catchy example of the fund’s early investment in Uber in 2011 as example of how this has been done.

Panel sessions followed, beginning with Luciana Lixandru – partner at the venture capital company Accel. Accel was an early investor in Facebook and Spotify. Luciana discussed the growth of the sector across Europe and how Accel emphasises the importance of correctly identifying the right individuals to invest in, more than the business model itself.  

A key goal of the session was to address some of the negative press headlines and perceived misconceptions about the industry. HarbourVest managing directors, Corentin Du Roy and David Atterbury, were the next panel speakers. On the subject of buying assets at discounts, the managers said that the long-term structural attractiveness of a business is a lot more important to them. There is more value to be realised by investing in a winner than something that is simply inexpensive. They also said that there certainly are cases where general partners overpay for assets, which the audience had picked out as one of its main concerns, in the polling, when asked about concerns they would have about investing in private equity. The managers also said that simply leveraging up to generate returns as a strategy was not viable post the 2008 crisis.  

The next panel speaker, Michail Zekkos, partner at tech focused Permira, discussed how as a matter of practise they will not invest in companies in structurally challenged industries, irrespective of valuation.

Peter Wilson, managing director at HarbourVest, discussed the investment context for private equity today, as global growth slows:

  • Fundraising cycle remains very strong;
  • A strong exit market is sustaining returns for limited partners (investors). Private equity has cemented its position in portfolios – it has beaten a public market benchmark shown over multiple time periods;
  • While the exit market is very strong, high prices are making deployments more challenging. Peter said general partners are adapting their approaches, incorporating more data analytics and machine learning processes, and trying to gain early access/pre-emptively bid for opportunities. Staying invested, being globally focused and making decisions with data at the core are central to maximising future returns.

The next speaker, Alex Rogers, also a managing director, discussed the ‘myth of overdiversification.’ He presented evidence that argued against the logic of dialling down diversification in private equity to maximise returns. Alex said risk-adjusted returns are maximised by being highly diversified.

The session concluded with a guest speech from John Coates, a derivatives trader turned behavioural neuroscientist and bestselling author (he wrote ‘The hour between dog and wolf’). In a world of ever more automation and artificial intelligence, John’s discussion on how humans compete against algorithms was highly interesting.

HVPE : QuotedData feedback on Harbourvest Private Equity meeting

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