Get diversified growth at a discount with HarbourVest Global Private Equity

This fund of private equity funds aims for long-term capital appreciation from holdings diversified by geography, strategy, stage of investment, vintage year and sector. HarbourVest Global Private Equity has exposure to more than 7,000 companies through its fund holdings, so is very well diversified.

The trust is one of the better performing private equity fund of funds, and its net asset value (NAV) returns have beaten those of broad indices such as FTSE World and FTSE World ex UK over one, three and five years.

But its recent share price returns have not kept up, so the trust is trading at a discount to NAV of around 22 per cent. Although its discount has been wider than this, for example in June 2016 when it reached 30 per cent, it has also traded at much tighter levels such as in May 2017 when it was around 9.6 per cent. So now could be a good time to add the trust to your portfolio because if investors recognise its strong performance the share price could catch up and the discount could tighten.

HarbourVest Global Private Equity is managed by HarbourVest Advisers, an affiliate of global private markets investment specialist HarbourVest Partners, which has a 35-year history and assets under management worth more than $40bn (£30bn). The company has a team of more than 100 private equity specialists based in Europe, Asia Pacific and emerging markets.

"The competitive private equity market favours large managers with global reach and broad industry expertise that can sustain future returns," say analysts at broker Liberum. "HarbourVest Global Private Equity stands out in the [private equity] fund of funds sub-sector for its consistent track record, the scale it provides and the attractive valuation. It is a member of the FTSE 250 and has a healthy balance sheet."

Simon Elliott, head of research at Winterflood Securities, adds: "Private equity has enjoyed a strong period in recent years, buoyed by good conditions for realisations. There is no sign that this will end in the near future and HarbourVest Global Private Equity is projecting another positive year for distributions in 2018-19. Uplifts on carrying values are averaging over 30 per cent in the past few years and these are likely to continue to drive NAV growth."

He believes the trust's discount to NAV has widened due to increased market volatility, leading investors to pull back from higher-risk options such as private equity.

There has been a period of strong returns that have pushed up asset values in the private market but there might not be the same level of attractive returns going forward. HarbourVest Global Private Equity also has a high ongoing charge of 2.63 per cent, which includes a management fee of 1.76 per cent plus performance fees of 0.87 per cent known as carried interests. And funds of funds tend to have higher costs because they involve more than one layer of fees.

However, HarbourVest Global Private Equity is one of the few ways private investors can access unlisted investments, which can provide useful diversification. And although the trust has high charges it has made strong returns. The long-term investment case for private equity also continues to be attractive, and HarbourVest Global Private Equity's good performance relative to its peer group and global listed markets over the long term suggests it is well placed to continue to grow its assets.

So if you can invest for at least five years, have a high risk appetite, and would like the potential growth and diversification unlisted assets can offer, then HarbourVest Global Private Equity’s consistent track record, discount to NAV and diversified portfolio suggest that a small allocation to it could be a good option. Buy. EA

HarbourVest Global Private Equity (HVPE)

Source: Winterflood as at 23 July 2018, *HarbourVest

Performance

Source: Winterflood as at 23 July 2018

Sector breakdown as at 30 June 2018 (%)

Source: HarbourVest

Geographic breakdown as at 30 June 2018 (%)

Source: HarbourVest