Trust news round-up: HVPE, European Smallers, Polar Cap, Montanaro, Barings
HarbourVest Global Private Equity (HVPE )
Performance
The £3.3bn fund, which recently committed to a self-managed structure that would no longer see it make investments via HarbourVest fund of funds, reported a 6.2% increase in net asset value to a new high of $57.55 per share in dollar terms in the half year to end of July thanks to strong performance in infrastructure and European investments.
However, returns in sterling terms – which is typically a more important measure for the fund’s investors – saw the NAV actually decrease 0.3%, reflecting dollar weakness. The share price also fell 1.8% in sterling terms to £27.10.
Portfolio changes
Over the period, the fund realised $142m from 243 merger and acquisition (M&A) transactions and initial public offerings, an increase of 16% on the same period last year. The realisations were made with an average uplift of 53% to carrying value.
Corporate activity
The board repurchased $44m of shares in the six months period while $43m of portfolio distributions were allocated to the distribution pool.
What the fund says
Ed Warner, chair of HVPE, said the group had made ‘significant progress… in implementing our strategic initiatives’.
‘Despite ongoing market volatility, HVPE’s portfolio has demonstrated resilience, with strong valuation gains and steady realisation achieved over the first half of the year,’ he said.
Warner added that private markets were showing signs of recovery, which the fund was ‘uniquely positioned’ to capitalise on given the new self-managed structure brings additional ‘cost efficiency and flexibility’, while the active share buyback programme ‘continues to deliver value for shareholders’.
What the analysts say
Stifel analyst Iain Scouller said the discount has changed little at 36% and offers ‘reasonable value when private equity exits are showing signs of picking up’.
‘The board appears focused on trying to enhance shareholder value and the 2026 continuation vote provides shareholders with an opportunity to give a view on the company,’ he added.
European Smaller Companies (ESCT )
Performance
The Janus Henderson-run trust managed to stay ahead of its benchmark in the 12 months to the end of June despite a rollercoaster year which saw it remove activist Saba Capital from its share register via a tender offer and the takeover of European Assets that helped it regain its size.
The trust reported a NAV total return of 14.5% versus a 14% rise in the MSCI Europe ex UK Small Cap index as positions in Germany, infrastructure, defence and financials all helping to buoy the portfolio.
Dividends
The board declared a further interim dividend of 3.45p to make sure existing shareholders received their second dividend before implementing a new dividend policy following the combination with European Assets.
It will pay at least 5% of the NAV per share in dividends at the end of the preceding year, paid from income, capital returns and reserves. The fund will continue to focus primarily on capital growth.
Corporate activity
Investors in the newly combined fund will have the opportunity to vote on whether the company continues every three years.
What the manager says
Manager Ollie Beckett, who runs the fund with Rory Stokes and Julia Scheufler, said there had been a ‘surge of optimism’ in European equity markets since the start of 2025, which has helped narrow the ‘extraordinarily large discount at which European small-cap was trading’ versus its European large-cap and US equity peers.
A number of headwinds, such as supply chain issues and energy prices, and the ‘resurrection of the inflation zombie’, have either abated or become tailwinds. The release of the ‘German debt brake’ can also provide fiscal stimulus.
Polar Capital Global Healthcare (PCGH )
Tender offer
The £466m healthcare and biotech trust has set out details of its upcoming 100% tender offer, confirming it will need 40% of shares to remain in operation.
Shareholders are being offered a chance of a 100% exit next month but in order to continue it has set a minimum of £270m of net assets. If this limit is not achieved, Polar Capital will wind up the fund.
Investors can expect a tender price of 381.43p per share, which is 99% of the current NAV, and above the 377.3p share price, which reflects the small 2% discount the shares trade at.
Shareholders will have until 25 November to tender their shares.
Background
The full exit is being offered by the top-performing trust as it plans to replace its eight-year fixed term with an unlimited life, meaning shareholders who do not wish to continue investing beyond the original eight years will not be forced to do so. Under the new policy, similar exits will be offered every five years in a bid to control the discount.
Association of Investment Companies (AIC) data shows PCGH is the best performer in the biotechnology and healthcare sector over five years, as it managed to sidestep the downturn in biotech over recent years. Over five years the NAV has grown 47.3% versus a 5.3% from the average trust peer, while the shares are up 68.1% against a decline of 13.7% from the average fund.
What the analysts say
Alex Trett, analyst at Winterflood, said the removal of the eight-year fixed life structure may ‘reduce the frequency of liquidation opportunities’ but provides ‘greater certainty’ for shareholders.
Montanaro European Smaller Companies (MTE )
Tender offer
The board of the £303m trust run by George Cooke and Stefan Fischerfeier is proposing a twice yearly tender offer. Shareholders will be able to cash in a total of 5% of their shares a year, with tenders offered around the time of the interim results and final results.
The tender price is set at a 5% discount to the prevailing NAV, which reflects the wider spreads among smaller companies and the costs associated with the tenders.
Background
The tenders are part of a trio of strategic initiatives offered by the board, which also include a ‘more proactive buyback approach’ that will see the trust target a single-digit discount and reduce discount and share price volatility while enhancing NAV. The current discount is 11%.
Shareholders will also pay a reduced management fee, the second reduction in four years, keeping the ongoing charges figure below 1%.
What the manager says
In a quarterly commentary, Cooke said the investment trust sector has ‘experienced a period of challenge and turbulence’ with activists challenges the status quo.
‘We remain committed as ever to ensuring that MTE offers value and an attractive opportunity to shareholders,’ he said.
He added that a ‘welcome resurgence of the “small-cap effect” in continental Europe is a sign that of a rotation out of the dominant US.
‘After so long in the investment wilderness, it was heartening − and reassuring − to see smaller companies once again outperform, reflecting many of the dynamics that make small-cap investing compelling,’ he said.
Barings Emerging EMEA Opportunities (BEMO )
Continuation vote
The £105m emerging markets trust has survived a continuation vote, although a third of objecting investors have made their feelings towards the portfolio known.
Just over 62% of shares voted in favour of the continuation of the 23-year-old fund last week. Of the votes against, the fund said the majority were attributable to a singe shareholder.
According to Refinitiv, the largest shareholder is activist investor City of London Investment Management, which owns just over a quarter of the shares, followed by West Yorkshire Pension fund with a stake of 16.8%.
Future exits
The fund has vowed to hold an annual continuation vote as well as a 100% tender offer in 2028 to give shareholders an out should it fail to outperform its benchmark over the next three years.
The policy was designed to keep investors on side after the board U-turned on its plan for a 25% exit made five years ago, should its shares trade at an average discount of 12% or more which they have.
However, when the time came, the board said it would not be in shareholders’ interest given it would reduce liquidity and increase costs.
Managers Matthias Siller, Adnan El-Araby and Alay Patel have managed to keep performance eon track despite the Russian invasion of Ukraine wreaking havoc on the portfolio as it was forced to write its Russian exposure down to zero.
However, the outcome could have been far worse if the decision had not been taken in 2020 to broaden the investment remit of what was then Barings Emerging Europe to Saudi Arabia, UAE, Kuwait, and Qatar.
Over the past year the fund is ahead of its AIC Global Emerging Markets sector, with a share price increase of 52.4% against 33.7%, and NAV return of 27% versus 27%.
In the five years since the rebrand, it has grown its NAV 49.1% versus a 36.7% uplift from the sector average, while the shares are up 62.1% against an increase of 42.5% in the sector average.
