HarbourVest managers optimistic despite thorny 40% discount 

The chair and fund manager of HarbourVest Global Private Equity (HVPE ) have told Citywire they are pleased with the direction the trust is moving in despite its mega discount. 

Results published yesterday reported on the year to end of January, when the FTSE 250 investment trust’s net asset value (NAV) per share rose 7.3%. Shareholders saw a strong 19.2% total return, though some of that has since been undone by the share price discount to NAV widening again. 

The rise was attributed to a pick-up in global private market activity following the post-Covid slump. The trust reported a total of 496 M&A transactions and initial public offerings (IPOs) at underlying holdings over the period – an uptick on 362 the year before.

The update also pointed to ‘positive news flow in recent months’, with companies like Revolut and Klarna considering IPOs, as ‘an encouraging sign that we could see further improvement in exit activity in 2025 and beyond.’

Interestingly, HVPE’s biggest underlying holding at 2.1% is Shein, the Chinese fast fashion giant which is now working towards a listing in Hong Kong. 

In terms of investor sentiment, those involved with the trust, including chair Ed Warner and de facto fund manager Richard Hickman, are pleased that a raft of new initiatives succeeded in narrowing its discount to 35% over the period.

However, that has since ballooned back to around 41% – effectively unchanged from the 42% level seen at the start of the results period in March 2024. 

The package of changes, announced in January, included doubling the allocation to buybacks to 30% of gross realisations, simplifying the investment structure and setting a date for a continuation vote for 2026. 

$106m (£84m) was used to buy back just over 3.4m shares over the results period in a bid to tackle the chronic discount, which is also a problem at private equity peers like Pantheon International (PIN ). This was equivalent to 2.7% of opening NAV and boosted NAV per share by 1.9%.

The simplified structure means moving away from investing via HarbourVest fund of funds. Instead capital will be deployed through a dedicated HVPE ‘separately managed account’, or SMA, into other managers’ private equity strategies and some direct ‘co-investments’ in unlisted companies. Secondary opportunities, referring to buying and selling stakes in existing funds, will also be considered. 

In the results, Warner said the structure will benefit shareholders due to increasing ‘control and flexibility around investment pacing and portfolio liquidity, and reduced look-through gearing’. 

Manager Hickman added clarity on the liquidity point. He told Citywire: ‘HarbourVest funds, particularly the fund of funds, are generally less liquid in the secondary market. There aren’t that many buyers who look for fund of funds on the secondary side and so discounts tend to be wider for those types of transaction. There’s value to be created if there are more liquidity opportunities on the secondary side.’

He also noted that investing directly into PE funds, co-investments or secondary transactions should ‘improve visibility’ for shareholders, in line with the trust’s stated ethos of ‘democratising’ the private market for retail investors. 

PE ‘well-insulated’ from tariffs

From January to end of April, the trust’s estimated NAV per share has increased by another 2.5%.

When asked how the 61% North America portfolio has been coping since US trade tariffs were announced in April, HarbourVest’s Hickman said the impact had been ‘muted’. 

‘Many of our companies, although they are in the US, are not actually exporting goods to other countries. They tend to be more service based or domestically oriented.’

In analysis since the start of 2025, the trust found only 1% of its portfolio by value to be deemed at risk of a ‘major impact’ from tariffs. 

‘A further 13% may experience some adverse impact, but the remaining 86% will be very low [impact]. So, our portfolio, and we think our private equity peers, should see a more muted impact from tariffs than a more conventional portfolio of listed equities,’ Hickman said. 

He added that on the secondary market, which ‘tends to be the leading indicator of transaction activity’ within PE, ‘we’re seeing a much more rapid rebound than expected’.

Hickman also said that venture will be the ‘most exciting’ area of the portfolio this year, having shifted from being a negative to positive overall contributor to performance within the last year. Venture and growth equity exposure make up about 30% of the trust.

Over the past decade, HVPE delivered a NAV total return of 242% and a shareholder return of 227%, outperforming the FTSE All-World index’s 221%. 

Commenting on the results, Numis analyst Gavin Trodd said recent changes were ‘positive’ and ‘should contribute to a narrowing of the 41% discount which in our view is far too wide for a high-quality manager with a strong track record.’