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Fund Profile

NB Private Equity Partners 17 October 2018

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
  • 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 over 20 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.
Kepler View

The board have taken a root and branch approach towards trying to address the company’s persistent discount. The managers are meeting their side of the bargain, continuing to deliver a strong investment performance and maintaining an investment level (mid-teens geared) that would be the envy of the directly investing peer group. In the current heady investment environment, this has delivered excellent returns.

If things were to become more tricky, the ZDP financing and the fact that the managers are directly in control of investment pacing decisions means it is highly unlikely that shareholders will become unstuck by being over-extended. The boards’ initiatives have all helped the discount to narrow over recent times, though at the current level of 16%, NBPE’s shares appear attractively valued.

Bull
Bear
Unique investment strategy, delivering sector leading returns
Specialist investment strategy
Low cost access to direct private equity deals
Geared exposure to companies which are themselves often geared
Wide discount and attractive yield
Illiquid underlying investments could count against sentiment in bear market
Continue to Portfolio

Fund History

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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
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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
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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?
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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
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28 Jun 2017 Searching for value
We identify pockets of value in the booming listed private equity sector...
View all

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