SVG Capital prepares to wind up this month

The trust has already returned £948.6m via three tender offers when it repurchased shares at 715p each, after agreeing to sell its portfolio to private equity firm HarbourVest.

SVG Capital's board recommends shareholders vote in favour of the proposals as the directors, who hold about 2 per cent of the trust's shares, are doing. The trust says it has no reason to believe it won't achieve the necessary majority of those voting.

The sale of the portfolio to HarbourVest followed a two-month takeover battle during September and October last year. HarbourVest initially made a takeover offer of 650p a share on 12 September, which SVG Capital's board rejected. It then held talks with several other potential bidders, proposed and abandoned an agreement to sell half its portfolio to Pomona Capital and Pantheon Ventures, and entered into a deal to sell its portfolio to Goldman Sachs Asset Management and Canada Pension Plan, which it subsequently dropped.

It finally agreed to sell its portfolio to HarbourVest for about £806.6m, a 0.6 per cent premium to the £802m value of the portfolio as at 31 July 2016, and equivalent to 715p a share net of estimated costs.

The trust's NAV at 9 June 2017 has been estimated at 750p per share, after allowing for estimated wind-up costs of £234,000, plus value added tax (VAT) and ongoing costs of £1.04bn during the wind-up . The trust's shares were trading at around 738p as of 13 June, a slight increase on the day before when the wind-up was announced, putting it at a discount to NAV of around 4 per cent.

This is considerably tighter than the levels at which the trust has traded in the past - SVG's average discount to NAV for the year ended 9 September 2016 was 20.2 per cent, but started to tighten following HarbourVest's takeover offer. Before the takeover offer SVG Capital's share price was about 566p.

If you wish to continue investing in private equity investment trusts there are a number of options. SVG Capital invested in other private equity funds rather than direct investments. This type of private equity investment trust is arguably lower risk than one that invests directly in private companies, because it has exposure to a greater number of investments. But they also do not benefit as much when an individual investment does well.

However, the discounts to NAV on all of these trusts have tightened considerably over the past few months so they perhaps do not offer as much value, although they could continue to deliver good returns.

We have three other funds of private equity funds in the IC Top 100 Funds, including HarbourVest Global Private Equity (HVPE), which has one of the strongest performance records among these. It trades at a discount to NAV of about 12 per cent, one of the tightest levels in its history.

Its portfolio is diversified by stage of investment, vintage year and industry. Over 60 per cent of its assets are in the UK, with about a quarter in the US. It invests in funds providing exposure to around 7,000 investments.

Pantheon International's (PIN) NAV returns have beaten its peer average over three and five years, as has its share price over one and five years. Its assets are spread across different investment styles and stages, including buyout, venture, growth and special situations, with the aim of reducing volatility of returns and cash flows. Its diversified maturity profile means it is not overly exposed to any one vintage.

Over half its assets are in the US, with a quarter in Europe. The trust is on a discount to NAV of about 16 per cent, one of its tightest levels for more than a year.

Myrto Charamis, analyst at Liberum, says Standard Life Private Equity Trust (SLPE) has a good manager and underlying portfolio of about 49 funds It has a yield of about 3.9 per cent following a change to its dividend policy - the trust intends to pay 12p per share for the year ended September 2017. Its board is committed to maintaining the real value of its new enhanced dividend and growing it at least in line with inflation.

Analysts at Liberum say: "Despite the competitive private equity markets, Standard Life Private Equity has remained active both in deploying capital in new investments and benefiting from positive realisations. Since 30 September 2016, its price has appreciated by 18 per cent."

Its share price has lagged behind the average return for private equity funds of funds over one and three years, but it is one of the best performers over five years.

The trust is on a discount to NAV of 13 per cent, one of its tightest levels over the past two years. It has recently abolished its performance fee so its ongoing charge should fall from the 2.33 per cent level Morningstar says it was at last September.

Performance

Source: Winterflood as at 14 June 2017 *Association of Investment Companies