NB Private Equity Partners

NBPE offers continuing good performance, a unique lower cost approach, and yet is still on a wide discount…

Add to watchlist Download View key data

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

NB Private Equity Partners (NBPE) is unique in the listed private equity (LPE) sector, given that the portfolio consists primarily of co-investments. It is now almost entirely invested in the equity of private companies. Given the range and quality of managers that NBPE invests with, the portfolio can be seen as a good representation of the top tier of US and global private equity deals.

NBPE is currently invested in a total of 120 companies, accessed through over 55 different third party private equity sponsors. The team hopes to increasingly focus its investments, making fewer but somewhat larger investments. At the current stage, the portfolio’s top ten equity holdings represent 26% of the total portfolio – not dissimilar to a traditional (quoted) equity fund.

With so many companies and ‘sponsors’, it is unlikely that investors are exposed to significant specific or key man risk. Whilst being diversified, NBPE offers exposure to a number of key industries: including technology, media and telecoms [TMT] (27%), healthcare (16%), industrials (14%) and consumer (16%). NB focuses on partnering with high quality sponsors, looking for specialist and deep industry knowledge from its partners, and an ability to source differentiated investments as well as deliver operational ‘value-add’ to investments.

With a high deal-flow of potential deals, and no obligation to invest in any of them, NB should be able to better maintain a fully-invested position for the trust, thereby reducing cash drag with, importantly, no pressure to commit to deals in the future. This is reflected in the numbers: NBPE remains the most fully invested LPE trust in the peer group.

In September 2018, the company announced a clarified dividend pay-out policy of 3% per annum or greater dividend yield on NAV. At the 30 September 2019 share price, NBPE’s dividend yield was 4.2%, which compares with a 3.8% weighted average dividend yield for the AIC Global Equity Income and 3.9% for the AIC UK Equity Income sectors.

Analyst's View

NBPE stands out in the LPE sector in being more highly diversified than directly investing peers, but (in contrast to fund of funds) attracts only one layer of fees on the vast majority of the portfolio. In our view, it can be seen as being a diversified exposure to the top tier of US and global private equity deals.

The co-investment model also has other advantages, not least that the manager is in control of when/whether investments are made, which avoids the need to over-commit or hold significant amounts of cash on the balance sheet. As a result, NBPE’s ordinary shares are the most fully invested in the peer group. Being geared clearly adds risks for investors, but it should also help NBPE’s NAV perform strongly if the current strong realisation environment continues.

Performance so far this year has built on NBPE’s strong track record. Over five years, the trust has achieved outperformance relative to its peers and the wider equity market. We see no reason why returns shouldn’t continue to be strong, although clearly if sterling appreciates significantly against US dollar, this will present a headwind for returns.

The board has largely completed its structural initiatives for narrowing the discount, and the new chairman seems determined to ‘finish the job’. The current share price discount to 30 September 2019 NAV of c.22% remains wide in absolute terms, as well as relative to peers.

We continue to view this as a high-quality fund that has bent over backwards to position itself for UK investors. The wide discount means the current share price is a potentially attractive entry point for those who want US and global private equity exposure.

bull bear
Unique investment strategy, delivering sector-leading returns Geared exposure to companies which are themselves often geared
Low-cost access to direct private equity deals Illiquid underlying investments could count against sentiment in a bear market
Wider discount and attractive yield Sterling strength into Brexit and the upcoming election will be a headwind
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.

Fund History

Disclaimer

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.

Kepler Partners is not authorised to make recommendations to retail clients. This report has been issued by Kepler Partners LLP, is based on factual information only, is solely for information purposes only and any views contained in it must not be construed as investment or tax advice or a recommendation to buy, sell or take any action in relation to any investment.

The information provided on this website is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use would be contrary to law or regulation or which would subject Kepler Partners LLP to any registration requirement within such jurisdiction or country. In particular, this website is exclusively for non-US Persons. Persons who access this information are required to inform themselves and to comply with any such restrictions.

The information contained in this website is not intended to constitute, and should not be construed as, investment advice. No representation or warranty, express or implied, is given by any person as to the accuracy or completeness of the information and no responsibility or liability is accepted for the accuracy or sufficiency of any of the information, for any errors, omissions or misstatements, negligent or otherwise. Any views and opinions, whilst given in good faith, are subject to change without notice.

This is not an official confirmation of terms and is not a recommendation, offer or solicitation to buy or sell or take any action in relation to any investment mentioned herein. Any prices or quotations contained herein are indicative only.  

Kepler Partners LLP (including its partners, employees and representatives) or a connected person may have positions in or options on the securities detailed in this report, and may buy, sell or offer to purchase or sell such securities from time to time, but will at all times be subject to restrictions imposed by the firm’s internal rules. A copy of the firm’s Conflict of Interest policy is available on request.

PLEASE SEE ALSO OUR TERMS AND CONDITIONS

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.

Welcome to Kepler Trust Intelligence

Kepler Trust Intelligence is authorised in the UK by the Financial Conduct Authority.
Please enter a valid email address
{{item.msg}}
Please enter a valid password
{{item.msg}}
Please enter a valid email address
{{item.msg}}
Please check your email. If an account exists you'll be sent instructions on how to reset your password.
Kepler Trust Intelligence is authorised in the UK by the Financial Conduct Authority. To ensure that we are able to provide content which is appropriate for you, please tell us a little about yourself.
Please choose an option
{{item.msg}}
Please enter a company name
{{item.msg}}
Please enter a location name
{{item.msg}}
Please choose an option
{{item.msg}}
Please enter a platform
{{item.msg}}
Please choose an option
{{item.msg}}
Please enter a trust
{{item.msg}}
?
The information contained herein is not for distribution and does not constitute an offer to sell or the solicitation of any offer to buy any securities in the United States to or for the benefit of any United States person (being residents of the United States or partnerships or corporations organised under the laws thereof). The investment funds referred to herein have not been registered in the United States under the Investment Company Act of 1940 and units or shares of such funds are not registered in the United States under the Securities Act of 1933.
Please confirm
{{item.msg}}
Please select an option
{{item.msg}}
See benefits
A free Kepler Trust Intelligence account allows you to access premium content including the ‘Kepler View’ – our verdict on the trusts we cover – and historical research so you can see how our view has changed over time. An account also unlocks useful facilities like the ‘follow’ button which lets you keep track of the trusts you’re interested in and as a logged in user you can also download PDFs of our research, and choose the layout of the page you’re reading to suit your preference. We will not share your details unless you give us permission to do so, and we won’t bombard you with emails – we only send one a week.
Please select an option
{{item.msg}}
Please enter your first name
{{item.msg}}
Please enter your last name
{{item.msg}}
Please enter a valid email address
An account already exists with this email - have you forgotten your password?
{{item.msg}}
Please enter a valid password
{{item.msg}}
Please enter a valid password
{{item.msg}}
Your answers help us to tailor our content to relevant investment trusts, and to ensure that the asset allocation and portfolio strategy research we produce is appropriate to our userbase. We do not share your personal information and your answers are not linked to your identity for marketing purposes.
Need help?

One more thing...

Did you know, you can 'follow' individual trusts on Kepler Trust Intelligence? Use the functions below to set up alerts and we'll send you research and updates on your chosen trusts.

Suggested trusts to follow

Browse all funds
Need help?
Current Site Kepler Trust Intelligence is produced by the investment companies team at Kepler Partners and is the UK’s premier source of detailed qualitative research on investment trusts. Absolute Hedge is a market leading UCITS research database providing proprietary research on funds, themes and strategies in the UCITS space. Kepler Liquid Strategies is a Dublin domiciled UCITS fund platform featuring a number of best-of-breed fund managers. Kepler Partners is a corporate advisory and asset raising boutique specialising in the regulated funds market in Europe and investment trusts in the UK.