HarbourVest talks London listing

Ahead of the investment company’s planned move to the main board of the London Stock Exchange in early September, HarbourVest’s associate director Richard Hickman talks about new measures shareholders need to consider.

HarbourVest Global Private Equity (HVPE) has sent out a shareholder circular asking its investors to vote on its move to the main market of the London Stock Exchange (LSE), HarbourVest associate director Richard Hickman told Secondaries Investor‘s sister publication Private Equity International.

HVPE, which invests in and alongside its own funds in primary, secondary and direct co-investments, is currently listed on the Specialist Fund Market in London and Euronext Amsterdam. It plans to move to the main LSE board on 8 September.

Shareholders have a month to respond to the circular sent on 24 July that also asked them to vote on six measures in total, including cancelling HVPE current dual share class structure in favour of ordinary shares required for the listing, a revised investment management agreement and amended articles of association.

To be implemented, the measures require approval from 75 percent of responding shareholders. Hickman, who works in portfolio development, said the investment company expects to obtain the required quorum.

Moving to the main board, first mooted in mid-2013, has also required the firm to reduce its US shareholding to less than 50 percent and this milestone was reached earlier in the year, Hickman said.

However, HVPE’s shareholder base remains quite concentrated with just under half of its shares held by six or seven US institutions, he noted. In the UK, major shareholders include BlackRock with about 10 percent and the City of Edinburgh Council.

“The top 10 shareholders represent about 70-75 percent of the share register and then we have a fairly long tail,” Hickman said.

In addition to boosting liquidity in its share trading and reducing the discount between its net asset value and current share price, a further goal of the main market listing is to diversify its investor base, Hickman said.

“We want to normalise our position within our peers, most of which are main market-listed. We’ll be more level with the likes of Pantheon and more attractive to retail investors,” Hickman noted.

The company plans to be tested for the All Share Index three months after listing and admission will open its shares to index trackers, Hickman said, noting that the current market capitalisation is not that far away from the FTSE 250.

Its market cap stood at £703 million ($1.1 billion; €1.4 billion) on 28 July.

When asked if HVPE intended to raise capital following the listing, Hickman said there were no specific fund raising plans. “It’s not easy to raise equity at a discount. You want the share price to get as close to NAV as you can. A discount of 17 percent cuts that off,” Hickman said.

HVPE reported an estimated NAV of $1.3 billion at the end of June, equivalent to a NAV per share of $16.36. Its shares were trading at $13.60 on 28 July.

In order for the company to grow, HVPE’s response has been to acquire other listed funds trading at a bigger discount, Hickman said, citing Absolute Private Equity, in which it invested $800 million and Conversus Capital, which was a $1.4 billion transaction.

Moving listing is not expected to change the fund’s investment strategy, he said.

HVPE has an investment pipeline of $961 million in commitments to its funds, of which about half is spread between its international fund of funds HIPEP VII Fund and HarbourVest Partners X, Hickman said. HVPE’s commitments comprise between 10-15 percent of its funds. “Our core programme is almost all US,” he said.

When asked about new fund launches, Hickman commented that there were always plans but declined to comment further.

In May, HVPE reported record realisations of $356 million for the financial year ending 31 January. The company does not issue dividends, except for ad hoc distributions, but recycles exit proceeds back to HVPE for reinvestment. “At the moment we’re focused on growing the fund,” he said.

HVPE invested $50 million in June and realised $52 million. Its cashflow is typically smooth, Hickman noted, with about 50 liquidity events a month.