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We reviewed PIP in our report, 11.9% average annual NAV growth since 1987, published on 6 September 2019, and in our note, History of value added to portfolio by holding Pantheon, published on 26 November 2019. PIP, on average, has generated ca.1.5x the market’s returns since inception in 1987, delivered by i) PE-owned businesses outperforming quoted ones, ii) PIP investing in the right PE sub-sectors, iii) benefits from being in the Pantheon family, and iv) a structured fund selection process. PIP gives investors liquid access to the illiquid PE market, strong corporate governance and a “real” NAV above its “book” value. The risks are detailed below.

  • December share price performance: Since early December 2019, PIP’s share price has risen from 2,325p to 2,525p, more than double its peers’ increase. We believe this relative performance was due to the high starting discount, the UK election bounce, record US indices (US 55% portfolio) and PIP going on new investor buy lists.
  • Peer news: On 20 December, Harbourvest announced that its NAV rose $0.53 to $26.47 during November (share price up 5% in December). On 13 December, Standard Life Private Equity Trust reported a monthly NAV rise of 10p to 441p (share price flat in month). ICG Enterprise Trust had no news (share price up 4% in month).
  • Valuation: PIP currently trades at a 9% discount to NAV, despite its record of market outperformance outlined above. We believe the “real” PIP NAV is likely to be above the accounting value, making the discount even higher. PIP reinvests returns for superior capital growth, and does not pay a dividend.
  • Risks: Sentiment to the economic cycle is material (note that PIP’s NAV rose every year in the early 1990s’ recession). Even though PIP has permanent capital and proven uplifts on exit, market sentiment to investments with illiquid and unquoted shares is adverse. Sentiment to the duration of the discount may also be an issue.
  • Investment summary: PIP is in an attractive market, can pick the best part of that market, and has competitive operational advantages. Its manager selection and portfolio structuring have added value. Corporate governance appears strong, and the “real” value of the assets is, we believe, above their accounting value. Investors are getting liquid access to the whole PE market. There are risks around the cycle, and illiquid and unquoted underlying assets, but comparing these with the historical returns makes the current discount an anomaly, in our view.
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