Pantheon International (PIN), the £1.5bn private equity fund under pressure from activists Metage and Saba, is looking to improve performance by refocusing on its top 25 external managers.
Following “detailed strategic analysis”, Pantheon continues to believe that private equity remains an attractive asset class but has decided a “significant reduction” is necessary in the number of non-core managers in its current 90-strong roster.
Having identified 25 private equity fund managers that have performed strongly during the recent volatility it has decided to increase its exposure to them over time, while ensuring the company invests steadily throughout the market cycle.
The announcement came in half-year results showing a marked improvement in the trust’s low rating. Despite a moderate 4.9% increase in net asset value (NAV), shareholders saw a 26.7% return in the six months to 30 November that beat the MSCI World and FTSE All-Share indices by 10% and 14.9% respectively.
That was a result of the discount – or gap between the share price and NAV – narrowing from 40% to 28% in response to £48.2m of share buybacks and the prospect of more actions to come as Metage and Saba press the board for a consistent improvement in shareholder returns. The company currently lags its fund of funds peer group with a 45% shareholder return over five years compared to the 73% average.
Pantheon Ventures, the fund manager, also commented on its investments in technology, its largest sector exposure, seeking to reassure shareholders about the recent sell-off in software stocks on fears some companies will be made obsolete by artificial intelligence (AI) tools.
Like HgCapital (HGT), PIN said most of its tech holdings were in “mission-critical” business software providers where its managers “see AI as an opportunity to expand the total addressable market and enhance operational capabilities to drive their portfolio companies to greater success.”
Pantheon also noted that private equity valuations had been much more stable than those of public equity markets driven up by soaring tech stocks. “Even post the recent sell-off, public equity multiples are still notably higher than private equity multiples,” it said.
Tony Morgan, who replaced John Singer as chair at the start of the year and last week announced a cut in the annual management fee to Pantheon Ventures, said: “As a board, we are focussed on increasing shareholder value and reducing the discount. Since becoming chair on 1 January, I have been encouraged by early signs of recovery in the private equity market and I am confident that the changes we are implementing will deliver greater value to shareholders over the medium term. We will continue to focus on improving performance, whilst ensuring costs remain competitive for our shareholders.”
Our view
James Carthew, head of investment company research at QuotedData, said: “In its interim statement, Pantheon International has tried to address the threat of agentic AI to its technology investments (which make up about a third of the portfolio), noting that on average “even post the recent sell-off, public equity multiples are still notably higher than private equity multiples”. However, the statement is referring to technology as a whole, which includes the hardware companies that are roaring away on the back of the AI capex boom, as well as the software businesses that have slumped recently on fears AI will eat into their revenues and profits. Pantheon’s manager is more optimistic, saying that use of AI can help grow the addressable market for the Software-as-a-Service businesses that make up most of its technology portfolio. The problem is that it is too early to tell. Pantheon’s 29% discount may not narrow much near term as we wait for this picture to become clearer. However, I would observe that HgCapital Trust, which is far more exposed to this threat/opportunity, still trades on a narrower (24% discount) rating.”
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