Fund Profile

NB Private Equity Partners 13 November 2023

Disclaimer

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.

Overview
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Overview

NB Private Equity Partners (NBPE) is differentiated from its peers in the sector because of the sole focus on co-investments, made on a deal-by-deal basis alongside third-party private equity managers, often free of underlying management fees (see Charges).

NBPE’s portfolio of 88 private companies benefit from two core themes – long-term secular growth and/or lower expected cyclicality. The portfolio is predominantly US focused (74%) and is well diversified; key sectors are technology, consumer and e-commerce, industrial technology and financial / business services.

NBPE’s portfolio represents exposure that traditional equity investors cannot otherwise access. As majority owners of businesses, private equity managers are in control of the strategy, and focus on improving the operating performance of businesses, generally taking a longer-term view than publicly owned companies. As we highlight in the Performance section, this is showing up in the underlying operating metrics of the portfolio, with double-digit revenue and earnings growth despite the significantly changed economic landscape.

Over the last five financial years, NBPE has been a strong performer relative to the MSCI World Index. The private company portfolio continues to perform, increasing by 3.8% on a constant-currency basis in H1 2023. In our view, this is a result of the strong deal origination and company selection of the team at Neuberger Berman (NB). Long-term NAV outperformance has been driven by the direct private equity investments, which have achieved a gross IRR of 16.2% (five years to 30/09/2023).

As at 30/08/2023, NBPE is 8% geared. As we discuss in the Gearing section, this is relatively low compared to its history and the target range. It reflects not just an element of caution from the managers, but also a desire to be in a position to take advantage of opportunities as they arise. NBPE has plenty of firepower to take advantage of opportunities.

Kepler View

NBPE held a capital-markets event recently, discussing the changes that the higher interest rate environment brought, and what this means for the private equity market and portfolio. One important aspect is underlying companies are increasingly performing add-on M&A transactions. When achieved, these sorts of transactions can be transformational in gaining scale or efficiencies, and therefore in helping to drive value. In NBPE’s Top 30 companies, 70% have completed M&A during ownership. NB believe that M&A transactions allow NBPE to put capital to work in companies that are performing and well known to the private equity sponsors.

For a number of reasons that we discuss in the Portfolio section, private capital is currently more constrained. As a result, the managers are seeing a significantly higher level of potential co-investment deal activity this year. NB note that sponsors are generally not lowering their expected IRR’s for new investment, nor expecting valuation increases to drive holding-period returns. Instead, earnings growth and M&A are the main drivers underwritten for value growth.

Elsewhere NBPE’s long-term capital allows it to participate in reinvestment opportunities, allowing shareholders to continue to benefit from backing proven winners. Private equity managers, such as those whom NBPE co-invests with, have historically proved adept at driving value creation within their investments. Whilst the economic backdrop remains challenging, investors who are taking a long-term view may see the current discount (see Discount section) to NAV as a potentially attractive entry point.

Bull

  • Unique investment strategy, with returns driven by direct equity co-investments
  • Manager has a high degree of control over the timing of new investments and, therefore, also over the balance sheet
  • Wide discount in absolute terms

Bear

  • Geared exposure to companies, which are themselves often geared
  • Underlying investments are illiquid, and deal activity in private equity markets generally appears to have slowed
  • Valuations of portfolio companies are performed quarterly
Continue to Portfolio

Fund History

19 Jun 2024 None in, one out
We ask why companies are disappearing from public markets, and if it matters…
28 May 2024 Fund Analysis
NBPE’s realisation activity shows its portfolio is ‘in demand’…
08 May 2024 The doctor will see you now
Taking the pulse of the listed private equity sector…
25 Apr 2024 Results analysis: NB Private Equity Partners
Robust performance and a tightening discount bode well for NBPE…
03 Jan 2024 Probably better asking an octopus
Our investment trust experts uncurl a tentacle each and choose their ‘top picks’ for 2024…
21 Dec 2023 The best-performing investment trust of 2023 (so far)
3i’s price rise this year is unlikely to be repeated, but what of the rest of the LPE sector?
05 Dec 2023 Don’t Panic!
Our analysts look for value against a backdrop of bombed out investment trust discounts…
13 Nov 2023 Fund Analysis
NBPE is well positioned to take advantage of the changing dynamics in private equity…
08 Nov 2023 Once more into the breach?
With yawning discounts across the board, some sectors have been hit harder than others - our analysts think there could be value there for those with the sangfroid to fight for it...
16 Nov 2023 NB Private Equity Partners
Paul Daggett
Rewatch this webinar which is part of our November online event 'Discounted opportunities in a tough market'...
Watch Recording
29 Sep 2023 Results analysis: NB Private Equity Partners
NBPE’s private portfolio has contributed to the trust’s performance during the period, while its strong realisation pipeline continues to deliver…
24 May 2023 Fund Analysis
NBPE’s portfolio has shown resilience during 2022…
18 May 2023 Treasure hunters
What can a corporate raider’s perspective tell us about private equity trusts..?
26 Apr 2023 Results analysis: NB Private Equity Partners
2022 saw a resilient underlying performance from NBPE’s private investments…
13 Apr 2023 Far from the madding crowd
Smaller nimble companies, both public and private, may be best placed to navigate the current environment…
31 Mar 2023 ISA Event: And now for something completely different
Everything you wanted to know about alternatives (but were afraid to ask)...
22 Mar 2023 Good vibrations
We identify some sectors with structural discounts we think could close over time…
31 Mar 2023 NB Private Equity Partners - Strength in depth for long term growth
Paul Daggett
Rewatch this webinar from our month-long online series 'A feast of ideas for your ISA' hosted by the team at Kepler Trust Intelligence throughout March...
Watch Recording
30 Nov 2022 Cry havoc!
Lessons from a year in which an already troubled world was savaged by the dogs of war...
03 Nov 2022 Fund Analysis
If NBPE’s portfolio companies prove resilient, the 35% discount may offer value…
30 Sep 2022 Results analysis: NB Private Equity Partners
NBPE’s portfolio fundamentals appear resilient….
03 Aug 2022 Diverging fortunes in listed private equity
Growth capital and buyout trusts now trade at similar wide discounts. In our view, this belies very different prospects for underlying earnings and for valuations...
06 May 2022 Results analysis: NB Private Equity Partners
NBPE had its best year on record in 2021…
20 Apr 2022 On the hunt
We review discounts in the investment trust space against a backdrop of harsh conditions...
23 Mar 2022 A differentiated approach to building long-term value
When it comes to choosing a private equity manager, it is vital to choose carefully...
09 Mar 2022 The under-explored power of listed private equity
Private equity remains off piste for most investors despite its potential appeal as a core holding…
02 Mar 2022 Spread 'em!
We explore how much dispersion in returns of stocks drive the differing fortunes of trusts…
02 Feb 2022 Getting in on the act: Private markets
Private markets could be the next big opportunity for investors…
21 Jan 2022 Fund Analysis
NBPE has had an exceptional 2021, but prospects remain bright...
12 Jan 2022 Bargain hunt
We survey the discount opportunities in the market and update on the performance of our Discounted Opportunities Portfolio…
22 Nov 2021 Flash update: NB Private Equity Partners
October NAV from NBPE shows continued momentum…
17 Nov 2021 How Do You Like Them Apples
Judging whether the US market is expensive is not as easy as many make it out to be…
23 Sep 2021 Even better than the real thing
We explain private equity and examine why tweaks to listed private equity trusts give the sector an advantage over the direct route...
20 Sep 2021 Flash update: NB Private Equity Partners
NBPE’s NAV momentum continues, and the portfolio’s maturity would indicate that further progress cannot be ruled out…
15 Sep 2021 Bargains galore
We review our discounted opportunities portfolio, with one constituent rallying more than 30% in just two months…
04 Aug 2021 60/40 and other dinosaurs
A simple practical step to take your portfolio from the 1990s into the 2020s...
16 Jul 2021 Flash update: NB Private Equity Partners
Recent write-up leaves NBPE’s NAV +22.2% YTD with potentially further progress to come…
14 Jul 2021 Grade inflation
We look at how our discounted opportunities portfolio has done in the first half of the year and update on the performance of our long-term rated funds…
09 Jun 2021 Slides and Audio: Masterclass in Private Equity investing
Watch the replay of our roundtable teach-in led by William Heathcoat Amory, head of research at Kepler Trust Intelligence...
26 May 2021 Fund Analysis
NBPE’s wide discount appears unwarranted...
19 May 2021 The complexity premium
We examine the idea that extra returns can be obtained from buying investments which are perceived to be more complex by most investors...
27 Apr 2021 Flash update: NB Private Equity Partners
NBPE has reported a very strong start to 2021, building on an excellent 2020…
14 Apr 2021 Wide Boys
We review our portfolio of chonky discounts as one star performer hits its target…
14 Jan 2021 Get 'em while they're hot!
We review the widest discounts in the investment trust universe and look at our selection of attractively cheap trusts…
11 Dec 2020 Flash update: NB Private Equity Partners
Significant realisation should prompt investors to re-look at the discount to NAV...
11 Nov 2020 Now that's what I call a discount!
Presentations and audio from our conference focussed on discount opportunities in the investment trust sector…
11 Nov 2020 Slides and Audio: NB Private Equity Partners
View the presentation and listen to the audio from our 'Discounts in Focus' event on 05 November...
05 Nov 2020 The haves and have nots
With listed private equity trust discounts widening, are investors mistakenly assuming that underlying portfolios will perform worse than public market indices?...
28 Oct 2020 Can the passives bull market continue forever?
We examine what the trend to passive investing means for active investment strategies…
28 Oct 2020 Fund Analysis
NBPE is unique in the LPE sector, which means its wide discount is attractive…
22 Oct 2020 Spotlight on discounts
As our event focussed on discounts approaches, we update our portfolio of discount opportunities and review discounts across the wider IT universe…
21 Jul 2020 A game of four quarters
Seven trusts, two quarters. Are our team still happy with their trust picks for 2020?
03 Jun 2020 Price is what you pay, value is what you get
The listed private equity sector has seen discounts widen markedly, but does this present an opportunity?
14 May 2020 Fund Analysis
NBPE’s discount has widened dramatically, but its managers have already taken decisive steps to protect the trust…
25 Mar 2020 Of mice and men
Our ‘best laid plans’ have somewhat ‘gang aglay’ since the KTI team put forward its best ideas for 2020 in early January…
02 Jan 2020 Crystal Balls
Drunk on our success in choosing funds to perform well in 2019, the team at Kepler Trust Intelligence is back at the table with a glint in its eye…
13 Nov 2019 Fund Analysis
NBPE offers continuing good performance, a unique lower cost approach, and yet is still on a wide discount…
13 Nov 2019 The parallel worlds of listed private equity
Some private equity trusts are on an average premium of 18%, whilst others trade on discounts of 15%. Are we missing something!?
24 Jul 2019 Fool's gold?
We examine the relationship between how much a fund costs and how it performs, with surprising results...
13 May 2019 Fund Analysis
A wide range of discount-narrowing initiatives have built a good foundation for investors in NBPE...
17 Oct 2018 Missing something?
As more and more of the world's most exciting companies delay listing, the opportunity in private companies has become too large to ignore...
17 Oct 2018 Fund Analysis
NB Private Equity Partners focuses on direct equity and debt investments in private equity-backed companies, with investments made alongside private equity sponsors...
21 Feb 2018 Fund Analysis
NB Private Equity Partners (NBPE) focuses on direct equity and debt investments in private equity-backed companies, with investments made alongside private equity sponsors.
21 Feb 2018 Once bitten, twice shy...
Fearful memories of 2008 mean discounts remain wide in the listed private equity sector, despite excellent returns from some of the trusts it contains...
24 Nov 2017 Fund Analysis
A unique approach to private equity that has delivered strong capital growth and income generation...
28 Jun 2017 Fund Analysis
28 Jun 2017 Searching for value
We identify pockets of value in the booming listed private equity sector...
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