Habourvest Global Private Equity has been selected by broker Liberum as one of its top alternative picks for 2020. This trust was also selected by investment trust rating company Winterflood as its top trust pick for 2020.
Fundeye profiled this trust last year highlighting its long history engaging with unlisted companies giving it a clear advantage over similar funds.
Liberum’s list of alternative trust contains some names that should be familiar to Fundeye readers, including Civitas Social Housing , Biopharma Credit and Pershing Square , the latter being the closed-ended version of Bill Ackman’s famous hedge fund.
Liberum selected harbourvest as it delivered a 12 month total NAV return of 13.8 percent to November 2019 and has a weighted average uplift of 68 percent on exits in the first half of 2019 (coming in at over 4-times costs).
Despite the fact that the trust trades on a double-digit discount of 10.2 percent, Liberum suggests that as this discount is closing in represents a risk to investors in this trust. The broker is presumably addressing potential new investors as a deep discount is a great time to enter an investment although when it narrows and perhaps becomes a premium, is the best time to exit.
Another benefit to holding to Harbourvest is the sheer diversification within its portfolio, having exposure to over 9000 companies globally. However, such a wide ranging portfolio may impact its ability to outperform, a point highlighted by Liberum. Given the amount of ‘dry powder’ held by private equity companies, this is also driving up the cost of attractive assets.
However, this trust is seeking companies of varying market caps so is not necessarily in competition with the behemoths of the private equity industry such as KKR and Bain Capital. Richard Hickman, director of investments and operations at Harbourvest told Fundeye that the product is seeing a shift in investor base. He said it is becoming more attractive to wealth managers with holdings growing significantly ‘in the last few years’. However he adds: “we started off from a different position from many of our peers because we had institutions from the US as shareholders initially.”.
This said the trust has been ‘deliberately targeting wealth managers’ as said institutions have been selling down their positions.
Given the closed-ended structure of the fund, liquidity shouldn’t be an issue and its sustained share price rally suggests that those wishing to get involved with this product should do so before the discount vanishes. While it is gratifying to see that brokerages such as Liberum have caught on to the benefits of this trust, Fundeye saw its potential last August due to an experienced team who have had exposure to some of the biggest IPO successes in recent years, including Facebook and Uber in which the parent company had interests in pre-float.
