M&A and dollar boost Pantheon International Participations

The manager of this investment trust, which invests in private equity funds globally, is Andrew Lebus, who intends to remain firmly anchored to the US. "The US is such a good market to invest in because the capital markets there work so well. The number of businesses, the regulations and the rule book is the same for everyone in the market. Consequently, enterprise flourishes in America and that makes it a very good place to invest money," he says.

Over half - 56 per cent - of the portfolio is now invested in US funds. Mr Lebus says over half of the fund's 10.9 per cent uplift in net asset value (NAV) in the six months to December 2014 was due to the appreciation of the dollar against sterling. The US was also where the majority of the fund's profitable deals were done. Despite that the fund is still trading at a discount of 14.96 per cent, although it has narrowed in recent months due to a share buyback and increased investor interest.

The fund has been tapping into a global surge in M&A deal flow, with deal values soaring last year to new heights. Global M&A activity hit $3.5 trillion (£2.3 trillion) in 2014, according to Fortune magazine, up 47 per cent on the previous year with 10 of the 15 largest deals for US-based companies.

"The M&A markets have been strong throughout 2014 and over and above that we're seeing profit and revenue growth within our portfolio at levels in excess of what would be experienced as an equity investor," says Mr Lebus.

During the half-year PIN received £129m in distributions as a result of IPOs listed in the first half of 2014 including restaurant chain Zoës Kitchen and software company Visma. Zoës Kitchen floated in April 2014 and handed £4.5m in proceeds to the portfolio. PIN's portfolio also gained £1.8m in distributions in September as a result of Carlyle's almost $5bn deal to acquire the US-based sales and marketing agency Acosta in July 2014.

Mr Lebus believes the market will be just as active over the coming year unless geopolitical issues and unexpected hikes in interest rates prove problematic.

"The exit environment will be as strong in 2015 providing World War Three doesn't break out," he says. "Anything could interrupt it but if nothing does then the world is still awash with liquidity and we're seeing more of it coming into the European and Japanese markets which will be good.

"What could interrupt it is if Putin throws more toys out of his pram and things deteriorate on a geopolitical basis. The other issue is interest rates. Everyone thinks they will turn slowly but if everyone's wrong then we will see a pull back."

The fund remains highly diversified across private equity assets, with holdings spread across different investment styles and stages to reduce volatility. It is split into two programmes. The primary programme invests in new private equity funds to access managers whose funds are frequently oversubscribed. The secondary programme buys funds typically between three and six years old for which fees and expenses for the first few years have been paid.

During the half-year PIP made 19 new commitments amounting to £132m, comprising £72m in seven secondaries, £16m in co-investments and £44m in six primaries.

"We continue to emphasise secondaries as the largest focus for our investment," says Mr Lebus. "Where we can add primaries we have done so, particularly in situations where we ve seen opportunities to invest in funds we may not see much of in the secondaries market."

The key sectors remain healthcare, IT, consumer and industrial, with healthcare and consumer driving a large chunk of returns last year. At the end of the year consumer made up the biggest sector, at 27 per cent, with IT accounting for 24 per cent.

Sources: Morningstar, at at 10 March 2015, Company data

Top 10 company holdings (% total private equity asset value)

Top 10 fund holdings

Geographic allocation (%)

Performance of PIN vs benchmarks (% total return GBP)

Source: FE Analytics, as at 10 March 2015