Big 12: Why Goldman Sachs’ Petershill Partners is in ‘right place for next five years’
This is the latest in our Big 12 interview series with the largest London-listed investment companies.
When it comes to investment companies, sometimes it can be hard to look past the dynamics of the discount.
After listing with much fanfare in 2021, a similar fate has befallen Petershill Partners (PHLL ) to most private equity trusts: the Goldman Sachs Asset Management-run vehicle is trading on a wide and seemingly entrenched discount to the estimated value of its assets.
Shares in Petershill Partners, which takes stakes in private markets fund managers rather than in unlisted and real assets directly, closed on Tuesday 35% below its reported net asset value (NAV). While there have been ups and downs this year, that does represent some improvement from a discount that exceeded 50% a couple of years ago.
When conversation with Ali Raissi-Dehkordy, one of two co-heads in the Petershill team, turns to that discount, he is keen to return the focus to the fundamental opportunity.
But the Goldman Sachs fund manager clearly believes there is something of a disconnect between reasonably buoyant conditions for their boutique alternative asset managers and the often lowly valuations ascribed to anything related to private assets in listed markets. This is where short-termism can prevail.
‘Your typical private capital investor has invested across multiple cycles, looks at a 10-year duration and will take a view,’ he said.
‘What’s fascinating to a lot of those investors is if you could offer them something like a Petershill Partners at a 20%, 30% discount to NAV that would be the best secondaries trade ever done in the private markets.’
Secondaries in private equity refers to the practice of buying and selling stakes in existing funds.
Petershill, which counts Chelsea Football Club owner Clearlake Capital among its holdings, can point to a growing number of stakes that were sold in ‘partner’ firms at valuations which more than support the NAV.
Since the start of 2024, these have come in at a 30% average premium to their valuations on the books, including the huge $700m (£520m) sale of venture capital firm General Catalyst at a 62% premium earlier this year.
‘We like the mid-market’
The Goldman Sachs fund manager, who co-founded the Petershill unit in 2007 and now runs it with Robert Hamilton Kelly, believes big opportunities lie ahead for their target sector.
‘If we think about the private alternatives industry as our primary focus, you have an industry that we think is about maybe four or five percent of investor [portfolios] and the expectation is that goes to 10-ish percent. So an $11tn industry getting closer to $19tn by the end of decade...’ Raissi-Dehkordy told Citywire.
Later, he suggests those ballpark figures don’t even really account for private markets firms’ considerable efforts to increase marketing to retail and mass-affluent buyers via new vehicles like long term asset funds, or LTAFs.
The pitch is to give Petershill’s own investors exposure to that rapidly growing and often very profitable industry, where profit margins can approach a ‘tech-like’ 50%. The trust yields 4.9% as a result of passing on most of the income Petershill gets from its partner firms, primarily from taking a slice of the management fees they earn on their funds.
One quirk of private markets managers is that while they are increasingly the provider of capital to other industries, they are unlikely to turn to their own rivals when they need to raise money themselves.
That is what creates the opportunity to take ‘GP stakes’ – in the lingo of private equity – and buy into these ‘general partners’, many of whom already have some existing connection with Goldman Sachs to open the door.
These alternative asset managers, which are typically employee-owned, might be looking for more capital to launch a new product or to invest more in their own funds, as is often expected in the industry.
Petershill’s particular niche is the ‘mid-market’, as opposed to industry giants like Blackstone or KKR. While there is no commonly accepted yardstick, these smaller firms tend to raise funds of $5bn or less and are often sector specialists.
‘We like the mid-market because these aren’t firms where they’ve saturated their own markets... They may be one of the best performing players, but they’re not the largest,’ said Raissi-Dehkordy (pictured).
The manager gave General Catalyst, which Petershill still holds as a smaller position, as an example. It was raising $700m funds when Petershill first invested. Today, that figure is more like $7bn.
Examples of specialist players in the portfolio include Frazier Healthcare Partners, a new investment this year, and Arlington Capital Partners. The latter is a GP focused on the government services and aerospace sectors, something which requires Department of Defense approval.
‘There’s only a handful of firms which have that approval. And so here’s an interesting moat,’ said Raissi-Dehkordy.
Petershill Partners invests in 24 firms – with an average 11-12% minority stake in each – running in the region of 200 underlying funds.
Struggling shares
While Petershill makes it into our ‘Big 12’ list of the biggest investment companies, despite its wide discount, the managers have made attempts to position it as an operating company rather than an investment trust with a portfolio of individual holdings.
With some exceptions, Petershill reports on how its partner firms are doing in aggregate, pooling together metrics like assets under management (AUM) and fee income. Raissi-Dehkordy acknowledges this is partly because there are limits on how much the partner firms want them to disclose.
The vehicle is 80% owned by Goldman Sachs itself via Petershill 2 and Petershill 3, two precursor private funds. This has created the perception of an ‘overhang’, given Goldman’s stated goal is trimming its own stake in Petershill to below 25% eventually.
The firm has clarified that the funds effectively have no set timeline to make those sales and are instead focused on ‘long-term value maximisation’. How this situation resolves itself is unclear.
In any case, Petershill’s shareholder total returns have been affected by the tough backdrop for listed European private markets manager since the initial public offering (IPO) in October 2021. Petershill’s wide discount has impacted NAV returns, which total 25.7% since IPO.
It is also worth noting that Petershill’s partner firm AUM is overwhelmingly in the US, and the shares of North American listed alternative managers have generally done far better.
‘It’s gone well enough’
Raissi-Dehkordy seems to take the view that while the vagaries of public markets may be out of their control, what is in their control has been going well.
Since the 2021 IPO, Petershill Partners has made investments in about $1.2bn of new GPs, while crystallising close to $1.9bn in the form of disposals, and returning about $1.2bn of capital to investors via two share buyback programmes and dividends, including special dividends.
In contrast to many private markets vehicles where realisations have dried up, Petershill has opportunistically sold investments at a steady clip, at an average premium of 34% since the start of 2024.
Most recently, Petershill offloaded its stake in private equity firm Harvest for around $560m, a 22% premium to the carrying accounting value at the end of last year.
‘I think all of that stuff has actually gone well enough but clearly we’ve also been operating in an environment where since 2021 there’s been headwinds in the equity markets and around the private capital industry, particularly fundraising,’ said Raissi-Dehkordy.
Again, on fundraising he argues Petershill has held up better than most. In the first half of 2025, partner firms raised fee-paying AUM of $19bn. The trust has held its guidance of $20-25bn of fundraising for the year unchanged.
After a slowdown in transactions and the IPO market – which has posed a problem for most London-listed private equity trusts in recent years – the kicker could come when realisations pick up.
‘I think the other big question everyone’s waiting for is performance fees. These really kick in once people start selling a lot of things, and it’s clearly been a slower period for the private alts industry,’ said the manager.
In its annual results, Petershill discloses an un-snappy metric called ‘Partner Private Markets Accrued Carried Interest’, which represents its proportionate share of unrealised profits from partner firms’ funds. At the end of last year, that stood at a cool $702m.
The five-year view
Where then does Raissi-Dehkordy see Petershill in five years?
‘I think there’s a really interesting opportunity to be a mid-market champion, at least in terms of the democratisation of alts exposure to the mid-market,’ he said.
Goldman says the trust is quite simply the only way that mass affluent and retail investors can access most of these businesses.
On the underlying portfolio, he added: ‘I think it’s more of the same but we feel like we’re in the right place for the next five years.’
Where the change could come is in investor perception. An aspect of that is simply building up more of a track record in public markets and a longer history of successful exits.
The Goldman Sachs manager contrasted the share price, set by trading in perhaps a small number of shares, with their run of recent exits.
‘It’s not necessarily indicative of what fair value is that someone would sell that thing at or buy the whole thing at,’ he said.
‘We’ve been able to demonstrate that through the private exits we’ve done with some of the assets that are in this thing. That’s something that someone who’s very informed has been willing to buy the whole thing at. And they’ve paid a 34% premium on average.’
