Princess Private Equity (PEY ) is to rebrand under the name of its Swiss fund manager Partners Group and take a leaf out of the book of Pantheon International (PIN ) with a commitment to return capital to shareholders if its share price rating remains weak.

A 23% share price recovery in the past year appears to have strengthened Partners Group’s commitment to the London-listed fund, after the controversial scrapping of its dividend in 2022 raised questions about its future.

Alongside annual results for 2023, the company sought to lay these fears to rest, announcing a name change to Partners Group Private Equity to align it more closely with a group running about $147bn (£116bn) in assets.

In addition, the board outlined a ‘clear and robust capital allocation policy’ designed to maintain shareholder returns when the shares traded at a steep discount, as they currently do, trailing 24% below net asset value (NAV).

Under this, the company will use a set proportion of free cash flow to buy back shares depending on the size of the discount.

At or above 30% it will use three quarters of ‘free cashflow’ to acquire shares, either for cancellation or to be put in treasury for potential re-issue if the shares ever move to a premium above NAV.

At or above 20%, half of free cashflow will go to buy shares until the discount narrows under the threshold.

The board defined free cashflow as ‘gross cash plus distributions and secondary sales contracted to be received’ minus operating costs, including dividend payments, fees, debt repayments, and a 3% reserve to fund existing investment commitments.

‘Following the dividend suspension last year, which was the third time the dividend was suspended during the Princess PE’s life, we thought shareholders and the board may have suggested putting the fund into run-off, or up for sale,’ said Stifel analyst Iain Scouller.

‘However, this is not the case and indeed it appears to be going in the other direction as Partners Group now appears to be keen to become more closely associated with the fund given the re-branding.

‘On a 24% discount we retain a “neutral” rating and think that a number of other funds in the sector offer better value and/or stronger recent performance.’.

Annual results from the Guernsey investment company showed a total underlying return of 1.8% in 2023 including the dividend of 0.73 euro cents per share as part of the fund’s 5% distribution policy. On 31 January the euro-denominated fund’s NAV per share was €14.27.

The shares rose just 0.9% to €10.90 as the company indicated that the €10m of cash held at the end of the year would not be used in buybacks. Over five years, the euro shares have returned 50.4% against a peer group average – excluding 3i Group (III ) – of 85.4%.

The fund was forced to scrap its interim dividend in 2022 on the back of soaring currency hedging, putting the fund at loggerheads with investors and causing two board members to resign, before the payout was reinstated last year.

The share price soared 32.6% in 2023 as private equity funds mostly avoided the big writedowns that investors had feared as the world economy slowed.

Despite the rally, the discount remained wide, leading the board to conclude it was a better use of capital to buy its own shares when they were cheap rather than invest in new assets.

‘This is particularly apposite when the share price discount is high and any purchase of shares by the company, and consequential reduction in the share count, offers an immediate enhancement to NAV, as well as an ongoing return from further investment in the existing portfolio,’ said the board.

Gavin Trodd, analyst at Deutsche Numis, said the buyback policy was ‘clear and concise’ and ‘considers ongoing liquidity requirements of the fund’ with the free cashflow recalculated each quarter.

Realisations, or disposals, will make up part of the free cashflow. Trodd said these were ‘muted’ last year, with distributions representing just 5% of net assets, the lowest proportion since 2000.

‘That said, conditions are starting to ease, and that realisation activity is likely to pick up in 2024, which will impact the level of capital returned to shareholders,’ he said.