NB Private Equity Partners

NB Private Equity Partners focuses on direct equity and debt investments in private equity-backed companies, with investments made alongside private equity sponsors...

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Disclosure – Non-Independent Marketing Communication

This is a non-independent marketing communication commissioned by NB Private Equity Partners. The report has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on the dealing ahead of the dissemination of investment research.

NB Private Equity Partners
  • 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.

William Heathcoat Amory
William Heathcoat Amory is a co-founding partner of Kepler Partners LLP and leads the Kepler investment trust research team. William has 18 years of experience as an investment company analyst. Prior to co-founding Kepler Partners in 2008, he was part of the Extel number 1 rated research team at JPMorgan Cazenove.

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This report has been issued by Kepler Partners LLP.  The analyst who has prepared this report is aware that Kepler Partners LLP has a relationship with the company covered in this report and/or a conflict of interest which may impair the objectivity of the research.

Past performance is not a reliable indicator of future results. The value of investments can fall as well as rise and you may get back less than you invested when you decide to sell your investments. It is strongly recommended that if you are a private investor independent financial advice should be taken before making any investment or financial decision.

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Kepler Partners LLP is authorised and regulated by the Financial Conduct Authority (FRN 480590), registered in England and Wales at 9/10 Savile Row, London W1S 3PF with registered number OC334771.



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