HarbourVest Global Private Equity Limited (LON:HVPE), or HVPE for short, is a listed investment company that aims to provide access for the public market investor to a globally diversified portfolio of private companies.
We have a portfolio of more than a thousand material exposures to private companies around the world of all types.
We are included in the FTSE 250 index and are a £1.4bn market value fund with daily liquidity of between £1mln and £1.5mln on average.
HVPE accesses investments through HarbourVest funds.
Harbourvest is a global private equity manager with more than 35 years of experience and $64 billion of AUM (assets under management) so we, as a listed company, access those funds alongside institutional clients around the world.
Those (HarbourVest) funds give us access to all types of private company investment globally, from early-stage venture situations through late-stage venture growth equity, small-cap buyouts, mid-cap and large buyouts and also some infrastructure as well.
Some of the best-known companies that we have, or have had, in the portfolio tend to come through the venture funds.
Companies that have IPO’d and have been particularly well-known over the years that we’ve had exposure to include Facebook, Linkedin and Twitter.
More recently there was Uber, which IPO’d earlier this year in 2019, while we also had Slack Technologies, Beyond Meat and Pinterest.
All those are well-known exposures.
They tend to be a relatively small part of the portfolio but do deliver material returns for us.
Going back to Facebook, several years ago we invested very shortly after it was founded originally through those venture capital managers that we have access to and that generated ultimately for HVPE a return of 300 times the original investment.
It isn’t typical but that does occasionally happen.
More recently with Uber, we invested in 2011, which was only two years post-IPO.
We invested through the funds and we have blended our exposure over time.
When we made the first exposure in 2011 Uber’s enterprise value was $16 million.
Now, it’s close to 1000 times that, so accessing a business when it is still relatively small and before it becomes global and a household name is very much what we are aiming to achieve.
HVPE floated in December 2007 and since then we’ve grown organically and effectively reinvested all the proceeds we received from realisations into new funds – bar two special distributions in 2013 and 2014.
Essentially, we’ve grown organically from an NAV of $830 million at the time of IPO to an NAV today of nearly $2.1 billion.
If you compound that over time on a NAV per share basis it works out that in the last 10 years we’ve grown at a compound rate of 12.1% annually.
In US dollars that’s already an impressive rate but convert to sterling or most other currencies and the figure is even higher.
We do feel like we are achieving the kind returns that investors will expect from a private company portfolio.
To put that in perspective, since the IPO we have outperformed the FTSE All-World Total Return Index by 3.3 percentage points per year with dividends reinvested.
So, every year on average that is 3.3 percentage points outperformance net of all costs that incurred in the fund.
What we are trying to achieve at HVPE is providing access for the public market investor to what we hope are the better-quality managers within the private markets.
Many of these managers are heavily oversubscribed when they raise new funds, so even the largest institutional investor with hundreds of millions of dollars of capital will struggle to get access if they are new to the market.
The reason HVPE is able to access those opportunities is that Harbourvest, our investment manager, has 35 plus years in the market investing with these managers in these funds and has effectively preferred access as a result of that long-term relationship.
So HVPE shareholders are gaining access to what is effectively an exclusive club whereby investors participate in these oversubscribed funds.
You may have seen recent press coverage on the trend has become known as the de-equitisation – the trend away from public markets towards private markets
This is probably driven by two factors.
There is a kind of push factor away from public markets, which is commonly ascribed to increased regulation, the increased costs of being listed and the short-term pressure that comes from quarterly results or semi-annual and annual reporting.
Public companies are subject to a great deal of scrutiny and short-term performance can sometimes be overemphasised at the expense of potentially long-term investment
What we have seen is more and more companies, particularly at the growth stage, that prefer to remain private or even to be taken private from the public market.
Private markets are much deeper and more liquid than previously, so we are seeing this trend towards increasing numbers of attractive investment opportunities only being available on private markets
What HVPE is trying to do is capture that growth for the public market investor.
We are listed as an investment company and are clearly trying to provide a portfolio of diversified private market exposure around the world.
That’s why we have all different types of deal and transaction in the fund.
We are trying to give a broad spread of opportunities so that wherever we are in the cycle there will be stronger performing areas, strong performing regions balancing the weaker performers.
What we are trying to do is to enhance consistency over time in the annual NAV results.
As you’ll see from the track record the fund has performed very consistently over time with double-digit growth rates typically every year.