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An activist investor, which efficiently campaigned to overtake the administration of the Hipgnosis Track Fund final 12 months, has taken intention at a FTSE 250 funding belief, claiming it isn’t delivering worth for its shareholders.
London-based Metage Capital has written to the board of HarbourVest International Personal Fairness Restricted (HVPE), demanding it revamp its technique to shut the share worth’s vast 45 per cent low cost to web asset worth (NAV) on the finish of October.
Metage argued that since chair Ed Warner took over in July 2020 the efficiency of the belief’s shares has trailed nicely behind the worth of its underlying investments. The share distinction between the worth of its NAV per share and the funding belief’s share worth has doubled. Closing this hole could be value £1.3bn to shareholders.
Amongst Metage’s proposals are that HVPE spend extra out there money on share buybacks. The activist factors to a system utilized by the open-ended funding automobile HarbourVest International Personal Answer SICAV SA (HGPS), designed for European markets, which launched in January 2023.
“Metage recommends that the board brings ahead formal proposals to align the funding portfolio of HVPE with that of HGPS and institutes quarterly tenders for five per cent of the corporate’s excellent shares,” wrote Tom Sharp, Metage’s chief funding officer, within the letter.
HGPS has already raised property underneath administration of $1.3bn as of September.
HVPE wouldn’t touch upon the Metage letter. Its share worth has performed nicely for shareholders over an extended interval. The funding firm’s NAV per share development over the previous 10 years of 242 per cent has far outpaced the 151 per cent of the FTSE All-World Whole Return index.
Though nearly all of non-public fairness funding trusts commerce at market costs nicely beneath their web asset values, HVPE has trailed this group. Towards its peer group of listed non-public fairness trusts, HVPE’s differential has expanded within the final three years to 12 per cent from 3 per cent, in response to information from Investec.
HVPE has made efforts to shut the hole with web asset worth, together with shopping for again its shares. For the reason that funding firm began shopping for again shares in September 2022, it has acquired over $120mn of shares, in response to the corporate. HVPE has a market worth of £1.85bn.
Metage want to see extra cash used for buybacks and fewer for brand spanking new non-public investments. HVPE has additionally bolstered its debt to organize for a surge in merger and acquisition exercise within the coming 12 months. It believes the funding belief may have extra alternatives to promote a few of its portfolio holdings and distribute earnings to its shareholders.
Some analysts see this debt degree as excessive. “There was a fabric enhance within the threat profile, with the [debt relative to NAV] having elevated from 6.8 per cent to twenty.6 per cent prior to now two years,” the very best within the sector, in response to Alan Brierley at Investec. Metage disagrees with including to this debt.
Activist buyers have taken extra curiosity within the UK funding belief sector prior to now two years. Elliott Administration of the US took a 5 per cent stake in Scottish Mortgage Belief, managed by Baillie Gifford, utilizing derivatives earlier this 12 months.
One other US fund, Saba Capital, has focused funding trusts. Saba raised its stake this month to 29 per cent within the European Smaller Firms Belief after demanding buybacks value as a lot as half of the excellent shares.
Metage holds 342,849 shares of HVPE and one other 330,000 utilizing a share swap.
