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Fund Profile

NB Private Equity Partners 03 November 2022

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) offers a differentiated way to harness the strong return potential of private equity-investing. NBPE’s direct investment portfolio has been assembled through co-investments made alongside a range of private equity managers, resulting in a diversified portfolio of 94 companies, as at 30/09/2022. These companies have been chosen by the team at NB from their significant deal flow (see Management section) for the potential to deliver long-term growth and, specifically, for their attributes of low expected cyclicality and, therefore, defensiveness and/or their exposure to long-term secular growth trends.

NB have been focussing on five broad areas: technology, industrial/industrial technology, consumer & e-commerce and business and financial services, together constituting 82% of the portfolio, as at 30/09/2022 (see Portfolio section). This focus helped insulate underlying earnings during 2020 and delivered strong earnings’ growth as the global economy rebounded subsequently, and we think it might mean that earnings may prove resilient in the current economic climate. It goes without saying that this exposure is very different to most public equity indices.

The manager’s confidence about future prospects rests partly on the increasing maturity of the portfolio. The current average vintage is 3.9 years, so the portfolio may expect a healthy pace of realisations in future years once the current bout of market volatility subsides. Of particular note is the 45% of the portfolio invested in 2018 and 2019 vintages.

Co-investing enables NBPE to achieve a significant fee advantage over many peers. NBPE can invest in deals largely free of management and performance fees to the underlying private equity sponsors. The trust’s AIC OCF ex-performance fee, for the year to 31/12/2021, was 1.96%.

Analyst's View

Private equity is a long-term investment asset class and LPE investors should also be taking a long-term view. 2021 was an extraordinary year for investment returns, with NBPE delivering NAV total returns of 45%. Realisations were a key driver of returns, but IPOs of holdings and febrile public equity markets meant that at the year-end, 20% of the portfolio was represented by public companies. NAV performance over 2022 needs to be seen in this context; NBPE’s NAV has declined by 11.2% on a total return-basis, based on the latest monthly factsheet, as at 30 September 2022, with private valuations as at Q2 2022. However, reflecting underlying valuations as at 30/06/2022, it is noteworthy that in constant currencies, private companies delivered a total return of 2.7% over the first half of the year. It is, therefore, public valuations which have dragged NBPE’s NAV USD-returns down.

As we note in the Performance and Discount sections, there is some uncertainty as to whether or how much public market falls, as well as the challenging macro-economic conditions we face, will lead to private company valuations being impacted. Certainly, as we heard at NBPE’s recent capital markets’ day, valuations of companies that require ongoing financing are being hit far harder than those that are profitable. We note that in this context, NBPE’s portfolio is not typically represented by early stage, pre-profitable companies. Rather, – like most buyout focussed funds – the majority of the portfolio is invested in EBITDA-positive companies, which don’t typically require further significant equity financing for continuing operations for the foreseeable future.

With the valuations typically lagging by two to three months, we would expect to start to see the full year earnings’ performance of the underlying companies being reflected in NBPE’s NAV in March/April 2023. With a share buyback potentially in prospect (see Discount), long-term investors may decide that a discount to NAV of 35% is an interesting entry point to harness the potential of NBPE’s differentiated portfolio of private companies.

Bull

  • Unique investment strategy, with returns now driven by 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
  • Valuations of portfolio companies are performed relatively infrequently
Continue to Portfolio

Fund History

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?
17 Nov 2023 Don’t Panic!
Our analysts look for value against a backdrop of bombed out investment trust discounts…
17 Nov 2023 Think inside the box
While private equity can sometimes lack transparency, it’s worth understanding what is going on inside these trusts to drive performance…
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…
15 Mar 2023 Tapping into the potential of the US midmarket
US mid-caps punch above their weight, and listed private equity trusts such as NBPE aim to tap into their potential…
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
10 Feb 2023 Wrong when it’s right
Economic data is balanced on a knife edge, but that hasn’t stopped the markets surging so far this year. With such a confusing picture to consider, we look at the opportunities lying elsewhere…
30 Nov 2022 Cry havoc!
Lessons from a year in which an already troubled world was savaged by the dogs of war...
18 Nov 2022 Investing in private equity with investment trusts
Closed-ended funds are a simple way to invest in the asset class…
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...
20 May 2022 A hands-on approach
Private equity trusts offer a solution for investors seeking a tightly controlled and monitored approach to ESG…
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…
10 Nov 2021 Is your portfolio an ‘80s throwback?
Private equity investment trusts could add valuable diversification to private investors portfolios, which often still resemble old fashioned 60/40 strategies…
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...
30 Jul 2021 The evolution of an investment thesis
NB Private Equity Partners explain why they think a key advantage of private equity is the ability to magnify potential growth via well timed business decisions...
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…
06 Apr 2021 More than meets the eye with private company investing
The case for having an allocation to private companies has become compelling in recent years – yet not all ways of making unquoted investments are made alike...
01 Feb 2021 Standing on the shoulders of giants
We take a look at NBPE, a trust which is managed using a unique co-investment strategy, and has the promise to become one of the future stars of the private equity space…
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 take another look at the discount to NAV...
23 Nov 2020 In adversity, strength
In this article we look at a number of catalysts that could see NBPE’s discount narrow, potentially offering a ‘double whammy’ in terms of returns for investors…
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…
22 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…
04 Mar 2020 Three real world examples of the value-creating powers of private equity
At their core, private equity trusts like NBPE create value by supporting growing companies - here, we discuss three such companies and how the investments worked...
29 Jan 2020 How investment trusts offer access to private equity
Listed private equity trusts give private investors the opportunity to tap into private equity - and NBPE's unique fee structure, combined with an impressive track record, makes it one of the best...
29 Jan 2020 Why private equity could boost your portfolio
Listed private equity offers clear diversification benefits for investors - but not all LPE trusts are cut from the same cloth...
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 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!?
13 Nov 2019 Fund Analysis
NBPE offers continuing good performance, a unique lower cost approach, and yet is still on a wide discount…
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...
15 Aug 2018 The income edge
Last year saw investment trusts soar in popularity among both retail investors and wealth managers. We examine why this has happened, as well as the structural advantages of investment trusts for income-hungry investors...
22 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...
22 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 diversified private equity trust, which has recently undergone some significant change, that offers a yield of 3.5% and trading on a wide discount...
05 Jul 2017 Searching for value
We look at how investment trusts are seeking value in the booming listed private equity sector...
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