Private Equity Investment Trusts

TCA

Totton wrote: »

Biotech is such an area :-)

Unfortunately Biotech is an area I know even less about than private equity!

TCA wrote: »

Yes, I made sure I looked at the 10 year picture and beyond where available (so 2008 was included) but admittedly was biased towards share price returns, so I'll review from a NAV perspective.

Looking at the NAVs in isolation, SVG Capital and HarbourVest beat the competition over 1, 3 and 5 years but both fall down when looking at longer periods. HarbourVest, which started in 2007, lost 24% in 2008 and SVG Capital lost 61% and 28% in 2008 and 2009 respectively.

Of the remainder, F&C, Standard Life European and Graphite Enterprise are similar good performers over all time periods up to 10 years. JZ Capital Partners and Pantheon are close runners-up but have performed poorly in comparison over the last year. Dunedin is several points off the pace (again a poor recent performance), APEF is average with a very poor 2013 and JPEL is the worst of the lot.

So on a pure NAV basis (and the fact that HPVE isn't on either of my platforms), my inclination would be to split my investment three ways into F&C, Standard Life European and Graphite Enterprise, with a notable mention to Pantheon. As it so happens, on this occasion, analysis on an SPTR basis, would probably lead me to just about the same conclusion.

Next step: dig a bit deeper into the composition of maybe the top half dozen best performing trusts and see what makes them tick......

TCA

On a day when most of my investments dropped in value, I see that Dunedin Enterprise PE Trust (DNE) fell a whopping 4.1%. Is anyone aware of a specific reason for this size of drop?

Surreyboy

I had been looking at RIT Capital Partners and also private equity trusts such as Pantheon International Participations. I know they are different and that RIT only includes PE as part of a multi asset portfolio, but I just had this question. The ongoing charges for each of these trusts is approx 1.2%. Does any one know if there would be another layer of charges above this, as PIP is a 'fund of funds' and RIT outsources quite a bit of its investing?.
Thanks for your help.

bowlhead99

I can't speak for RIT as it's been a while since I looked at it, but knowing the rough figures from the reports at Pantheon (PIN), the 1.2% is only the management fee and other ancillary costs of the investment trust itself (legal, administration, audit etc etc). The ~£10m of costs on ~£850m average NAV (Dec 2012 assets 830m, Dec 2013 closing assets 870m) in the 2013 financial statements would equate to that sort of percentage.

The going rate for the underlying funds in which it invests, is ~1.5-2% fee on the commitment made to each underlying fund, plus performance fees on top. They don't get that for free. However, the realised and unrealised gains that they recognise and report during the year, on the underlying investments that they made, are after those costs have been taken off. Therefore they don't appear as separate costs in their P&L.

So on a look-through basis, yes you are exposed to quite a bit more than 1.2% of fees. However as an investor, what you are concerned about (IMHO) is the return net of fees. It is accepted in the world of alternative assets that you have to pay a manager to get you access to the asset class and make the decisions, because the asset class is not one you can directly access and strike individual deals yourself.

So, if the return net of fees over the long term is attractive, then invest - if not, don't. I would not reject a high performing fund just because the fees were high compared to a computerised tracker where no actual work was done in creating deals or monitoring investments.

Summary - yes there is a layer of fees - but you don't need to come up with any extra cash to pay for it on the side. And if the price goes up by 10% then that is after all the investors in the fund have taken stock of the situation and considered that as of today they value the fund 10% more than they previously did, regardless of what fees were taken at level 1 or level 2 or level 3 etc.

Surreyboy

Thanks for the helpful advice.

So when you look at the performance figures on the AIC website, trustnet or the trust's own website, and it says the fund has (for example) risen by 10% over 3 years, would these performance figures normally be net of charges?

TCA

Surreyboy wrote: »

So when you look at the performance figures on the AIC website, trustnet or the trust's own website, and it says the fund has (for example) risen by 10% over 3 years, would these performance figures normally be net of charges

Yes, otherwise comparisons would be a bit of a nightmare.

westy22

An interesting article on Private Equity ITs on Trustnet today http://www.trustnet.com/News/527897/oriel-tips-out-of-favour-investment-trust-sector/

Reaper

westy22 wrote: »

An interesting article on Private Equity ITs on Trustnet today

I notice "Princess" gets a brief mention, which is one I invested in but which hasn't really been noticed by anyone.

In many ways it is the opposite of investment trusts discussed in this thread. It has a very high yield over 8%! However the NAV has been flat. The discount is high at 20%. They and I are hoping this will narrow when they get more broker coverage, though it has been a lot higher in the past.

I'm not recommending it, just pointing it out as a complete opposite to show the range of options available.

IronWolf

You shouldn't invest in Private Equity funds unless you find a manager you really trust. They are much harder to value fairly and will often trade at big discounts to NAV so need to be long term holdings, and you only want to invest with someone long term if you believe in them.

I own a few PE companies run by people I trust, their past share price performance was largely an irrelevance.

Thrugelmir

Private equity companies are having difficulty offloading their investments. Has been the case for a while now. Days of flipping appear to be over.