- Unique investment strategy in the listed private equity universe which continues to deliver strong results for shareholders.
- Managers continue to successfully deploy capital despite the strong environment for realisations, and at 31st August 18 NBPE was 117% invested (ie geared)
- Dividend yield of 3.8% comparable with the AIC Global and UK Equity Income sector averages, but offers significant diversification
- Board led initiatives have meant discount has come in, but it remains wide in absolute terms at 16%
NB Private Equity Partners (NBPE) is managed by the private equity group of Neuberger Berman (NB) and focuses on direct equity and debt investments in private equity-backed companies, with investments made alongside private equity sponsors. This approach is more akin to direct listed private equity (LPE) models such as HG Capital, but the company makes these investments alongside a wide range of third party managers rather than just one. As such, NBPE is unique in the LPE space.
The manager’s strategy has led to strong NAV total returns over the past five years (112% compared to the average for the directly investing peer group of 66%, albeit NBPE has benefitted from the strong dollar). NBPE has been an attractive option for those who want to add greater diversification to their portfolio as it has produced a correlation to the MSCI ACWI of just 0.12 in NAV terms over the past five years, the lowest of the peer group. This low correlation is borne out in the trust’s discrete calendar year returns, which have differed quite markedly from those of the MSCI ACWI, for example.
The portfolio has a similar degree of concentration that one might find with a typical equity fund. The top ten equity investments for example, constitute around 27% of NAV, and no investment is greater than 3.5% of NAV (as of the end July 18).
One recent development is the announcement of the manager's intention to focus the portfolio, making fewer but larger investments. Wherever possible, they will be looking to invest “bite-sizes” of up to $20m per equity investment. Currently the average equity investment is valued at $6m (vs 2016 average of $6.4 million and 2015 average of $5.6 million), so if the managers are successful, making larger initial investments will markedly change the shape of the portfolio.
Thanks to the implementation of a dividend policy in 2013, NBPE is now also an option for investors wanting to diversify their income stream. Its dividend has been partly funded by capital, due to the steady flow of realisations it receives on an annual basis. At 3.8%, its dividend yield is comparable with the AIC Global and UK Equity Income sector averages.
In addition, while the underlying NAV has performed well, the board has undertaken several initiatives over time (as well as a new dividend policy) to reduce the historically wide discount. These have included a London premium listing and enfranchisement of Class A shares, shifting to a direct investment strategy, share buy-backs and, most recently, concentrating the trading liquidity of the company on the LSE by transferring the US Dollar listing to the LSE from Euronext and applying to delist the Class A Shares from Euronext. In contrast to peers, as at the end of August 18, the company is geared with an investment level of 117% of NAV.