HarbourVest Global Private Equity (HVPE) has announced its annual results for the year ended 31 January 2022, which its annual report describes as “A strong financial year with record levels of performance and activity”. To summarise, HVPE has provided NAV growth of 37%, share price growth of 48%, a 20 percentage point reduction in its discount over the year and has made total new commitments of US$1.4bn. Its manager comments that “The year to 31 January 2022 was an exceptionally strong period for HVPE, marking the highest annual NAV per share growth figure since inception.”
Aided by Roblox and Coinbase
Activity levels were high during the year, with some 555 IPO and M&A transactions across the portfolio during the 12 months, which HVPER’s chair, Ed Warner, says were on a par with levels last seen in the year ended 31 January 2015. Record distribution proceeds from the HarbourVest funds more than offset capital calls during a strong period for investments and contributed to net positive portfolio cash flow of US$320m. This, combined with value gains in the unrealised portion of the portfolio, underpinned HVPE’s very strong NAV growth over the year. The strong exit activity and resulting cash inflows contributed to a year-end closing cash balance of US$284m. Elevated exit activity through the year resulted in a sustained flow of cash distributions, crystallising value growth from prior periods. Notable exits included Roblox and Coinbase, which contributed US$0.50 and US$0.42 respectively to NAV per share. Other top IPO exits included Allfunds Bank, monday.com and UiPath.
The major drivers of NAV growth
The largest drivers of NAV per share growth during the 12 months to 31 January 2022 were:
- Fund X Venture, a US-focused venture fund of funds, was the largest contributor, adding US$1.95 to NAV per share. With a vintage year of 2015, this fund is in the growth phase. This growth came predominantly from unrealised gains over the period.
- Fund XI Venture, a later fund of the same strategy, adding US$1.12 to NAV per share. This is a 2018 vintage fund in its investment phase. This uplift was derived primarily from unrealised gains over the period.
- Fund XI Buyout, a US-focused buyout fund of funds, added US$0.99. This 2018 vintage fund is in its investment phase. As might be expected at this stage of the fund’s life, most of this growth was driven by unrealised gains.
- Fund X Buyout, a 2015 vintage US-focused buyout fund of funds, was the fourth largest contributor adding US$0.94 to NAV per share over the period. This growth came predominantly from realised gains over the period.
- HIPEP VII Partnership, a 2014 vintage international fund of funds, added US$0.65 to NAV per share. This growth came predominantly from realised gains over the period.
All of the remaining HarbourVest funds in the portfolio added an aggregate US$9.05 to HVPE’s NAV per share over the financial year.
New fund commitments
During the year, HVPE made total commitments of US$1.4 billion across seven HarbourVest funds and seven secondary co-investments (12 months to 31 January 2021: US$195m). This took total unfunded commitments to US$2.5bn at 31 January 2022. HVPE says that the substantial year-on-year increase in commitments largely reflects below-average commitments made in the prior financial year, following the temporary pause to the commitment plan during 2020 in response to COVID-19. Of the total capital committed, the largest commitment was US$445m to HIPEP IX (an international multi-strategy fund of funds). Other large commitments included US$245m to Fund XII Buyout (a US-focused buyout fund of funds) and a commitment of US$210m to Asia Pacific 5 (an Asia-focused multi-strategy fund of funds). The remaining commitments included US$170m to 2021 Global Fund (a global multi-strategy fund of funds), US$135m to Fund XII Venture (a US-focused venture fund of funds), US$100m to Co-Investment VI (a global direct co-investment fund), US$73m to various secondary transactions within Secondary Overflow IV, and US$45m to Fund XII Micro Buyout (a US-focused small buyout fund of funds).
Portfolio cash flows and balance sheet
HVPE was net portfolio cash flow positive in the 12 months to 31 January 2022, driven largely by elevated distributions during the months of June, September, November, and December 2021. In the 12 months to 31 January 2022, HVPE received a record (in absolute terms) annual total of US$835m in cash distributions (12 months to 31 January 2021: US$290m), while funding a record capital call amount of US$515m into HarbourVest funds (12 months to 31 January 2021: US$431m). This resulted in HVPE receiving net proceeds of US$320m over the reporting period.
HJVPE says that record monthly levels of distributions (in absolute terms) from HarbourVest funds were seen in June (US$131m) and then quickly surpassed in September (US$132m), reflecting consistently strong exit activity. Over the year, proceeds were mostly driven from HarbourVest primary funds (69%), followed by secondary funds (18%). As a result of the net positive cash inflows, HVPE’s cash balance increased from US$98m at 31 January 2021 to US$284m at 31 January 2022, while the Company also repaid its remaining outstanding borrowing on the credit facility.
HVPE says that, to further support its unfunded commitments as its scales up, a US$100m increase to the credit facility was announced on 21 December 2021, bringing the total size of the facility to US$700m at that date. The additional US$100m is being provided by Credit Suisse, which increases its total commitment to US$400m. Mitsubishi UFJ retained its current commitment of US$300m. As at 31 January 2022, HVPE had the full US$700m credit facility available.