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We reviewed PIP’s 2020 results in our note, Positioned for sustained growth, of 14 August 2020. In summary, PIP is “generally well placed to withstand and, in certain cases, to benefit during a period of significant economic and market turmoil”. The key statistics were i) 11.6% average annual NAV growth since inception, ii) +4.0% NAV per share growth in the year, despite valuations being based off March 2020 market lows, and iii) £228m distributions vs. £118m calls, a £110m net cashflow. PIP had £121m of net available cash and £310m of undrawn borrowing facilities. A 25% discount to NAV appears anomalous with performance.

  • August performance report: NAV was 2,846.2p, up 121.4p (+4.5%). Valuation gains rose 171.9p (mainly due to the move from March to June basis for underlying valuations, 94% of latest valuations based off June), investment income rose 0.6p, foreign exchange movements fell 47.5p, and expenses and taxes fell 3.6p.
  • Peer news flow: SLPE declared a 3.3p quarterly dividend on 3 September. APAX reported a realisation, adding €0.04 (2%) to NAV. BPET reported multiple director buying. 3i’s portfolio update reported that its September review of portfolio companies reinforced its confidence in the resilience/strength of their earnings.
  • Valuation: PIP shares trade at a 25% discount to NAV, despite their long-term outperformance. We believe the “real” NAV is likely to be above the book value on the accounting date, as the company consistently reports uplifts on realisation. PIP re-invests returns for superior capital growth and pays no dividend.
  • Risks: We note i) sentiment to the economic cycle (NAV rose every year in the 1990s’ recession and in FY’20), ii) adverse sentiment to illiquid and unquoted investments (PIP has permanent capital and proven exit uplifts), and iii) sentiment to the sustained discount could be an issue. Short term, there can be FX volatility.
  • 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. This has delivered 11.4% annual NAV growth since inception. Corporate governance is strong, and the NAV is conservatively valued. Investors get liquid access to the whole PE market. There are risks around the cycle, and illiquid and unquoted underlying assets, but these, against the historical returns, make the current discount to NAV an anomaly.
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