“Marketing is key,” declares outgoing chair John Singer after another year in which the private equity fund’s share price has not reflected the performance of its portfolio.

Pantheon International (PIN) is pinning its hopes on a marketing offensive to bring investors into the £1.5bn listed private equity fund after another year in which its share price has remained stubbornly weak.

Net asset value (NAV) rose just 1.2% in the year to 31 May as private equity deal-making remained subdued and the funds with which Pantheon invests had to hold onto their companies for longer.

However, the big disappointment was a 9.2% drop in the share price which ended the financial year 40% below net asset value despite the company buying back £53.5m of shares and returning £150m to shareholders in a landmark tender offer in 2023.

The board will have been relieved to have seen the discount recently narrow to 34% after it pledged another £30m of buybacks over the summer and this month’s bid for Apax Global Alpha (APAX) underlined the huge value in the sector.

Nevertheless, the long-standing discount is a huge problem, turning Pantheon into an underperformer when its underlying returns are strong and should attract investor interest.

Figures from the company show over five and 10 years it has generated 11.5% and 12.2% annualised returns from its portfolio of funds and direct company holdings. This beats the 11.1% and 6.1% annualised returns of the UK’s FTSE All-Share and compares favourably to the 12.7% and 11.9% returns from the MSCI World index, underlining the company’s argument that private equity deserves a place in investors’ portfolios.

Unfortunately, the lagging share price undoes much of that good work in identifying top managers and companies, having delivered just 7.5% and 8.7% a year over five and 10 years in actual shareholder returns.

That’s not a disastrous outcome with the latest data up to yesterday showing shareholders receiving a 150% total return over the past decade. Nevertheless, the non-dividend paying growth fund is not the poster child for private equity that Pantheon believes it should be.

“Effective” campaign coming

Having sorted out its balance sheet and promised an even more “dynamic” capital allocation strategy in future – that will apparently involve more than just choosing between buying back shares or making new investments – chair John Singer said the board had been working with its marketing agency to execute a more effective campaign after its annual general meeting in October.

“We believe that marketing is key to extending our reach to a wider set of investors as part of our democratisation drive to increase demand for PIN shares,” he said.

Singer, the driving force behind Pantheon’s increasingly urgent efforts to re-rate its shares, won’t be around to see if the ad blitz works, as he steps down after the maximum nine years on the board, three years as chair.

His successor will be Tony Morgan, a private equity veteran who has worked in senior positions at CDC, Permira and Alchemy Partners. Morgan was one of three new non-executive directors who joined the board in January, adding to the sense of change at Pantheon, where fund manager Helen Steers is also retiring at the end of the year, leaving the portfolio in the hands of co-manager Charlotte Morris.

Our view: a co-ordinated effort is needed

James Carthew, head of investment company research at QuotedData, said:
“I can understand the Pantheon International board’s frustration with the discount. Yes, NAV returns weren’t very exciting last year and that was always going to be a factor, but the seeming lack of impact from what has been a substantial buyback programme must have been a blow. Things have improved since the end of May, encouraged a little by the Apax bid. However, our message to the Pantheon board and to the sector as a whole sector has always been that most investors distrust private equity – which is regularly and unfairly portrayed as a bogeyman – and a coordinated effort to educate the investing public is the answer. If the AIC succeeds in its efforts to get listed private equity vehicles included in the Pension Schemes Bill, that might help too.”