Modest hit to Standard Life Private Equity NAV in March – At its half-year mark on 31 March 2020, the NAV total return was -6.3%, which compares to a return on the All-Share Index of -22.0%. A widening discount left shareholders with a return of -25.9%.The dividend was 6.6p, 3.1% up on 2019. As the chair points out, the significant discrepancy between the share price return and that of the NAV is in part a timing issue, as it is the result of investors attempting to estimate how much valuations are likely to fall as a consequence of the crisis.
The manager says that valuations at 31 March 2020 reflected the initial impact of the COVID-19 outbreak on the portfolio. The quarterly change in the value of the portfolio was -12.5% (excluding the impact of foreign exchange movements). This was the first quarter that the NAV began to reflect the impact of COVID-19. Going forward, the trust expects that private equity valuations will continue to be impacted negatively, which could lead to further reductions in NAV in the second half of the trust’s year. [Against that, however, markets have been recovering since March. The share price fall looked like it may have been overdone.]
Then, today, the trust published its estimated NAV at 31 May 2020. this was 427.7p, up 1.3p from the level at the end of March, reflecting a fall in the pound relative to the euro. they say “Of the valuations dated 31 March 2020, 86.9% of the portfolio by value accounted for the initial impact of COVID-19. For 10.7% by value of the portfolio, these interests were adjusted downward by the manager as the underlying managers had not reflected the initial impact of COVID-19 within their 31 March 2020 valuations.”
In total, four primary fund commitments, one secondary transaction and one co-investment were completed in the period. The statement says that the overall pace of deployment will fall in the second half of the financial year given the uncertainty surrounding COVID-19. In May, a new commitment of €25m was made to Vitruvian IV.
The portfolio continued to generate strong realisations during the period, with distributions of £93.8m. This includes the realisation of the position in 3i Eurofund V, which was its largest fund exposure at 30 September 2019.
Total outstanding commitments were £451.2m at the end of March which had risen to £457.6m at the end of May (30 September 2019: £450.3m). The value of outstanding commitments in excess of liquid resources as a percentage of net assets was 42.2% in March (30 September 2019: 42.6%). The board says that this remains comfortably within its long-term target range of 30%-75%. They estimate that £64.4 million of the existing outstanding commitments are unlikely to be drawn. The trust had resources available for investment of £73.1m at 31 May 2020 (30 September 2019: £67.7m). In addition, it has an undrawn £100m syndicated revolving credit facility, provided by Citibank and Société Générale, which expires in December 2024.
The chair says “the company is in a stronger financial position than it was ahead of the Global Financial Crisis in 2008/09. Private equity investing requires a long-term perspective and periods of disruption, such as that which we are currently experiencing, are something that have to be weathered. Whilst we expect that the number of new primary investment opportunities will reduce in the short term, we also take the view that the market adjustment is likely to present investment opportunities that will provide returns over the long term for shareholders.”