SLEPET broadens investment strategy

SL Capital’s listed private equity trust can now take a more flexible approach to secondaries transactions, among other changes.

Standard Life European Private Equity Trust – known as SLEPET – has received shareholder approval to increase its annual dividend, simplify its fee structure and broaden its investment capabilities, the company announced on Wednesday morning.

The trust is managed by SL Capital Partners and holds stakes in funds managed by blue-chip managers such as Permira, CVC Capital Partners, BC Partners and 3i.

SLEPET will also be able to take a more flexible approach to buying in the secondaries market. Previously the fund had primarily acquired stakes in managers it had already backed; now it is able to be more opportunistic.

The move comes at a time when a number of listed private equity vehicles are undergoing dramatic changes and returning capital to shareholders. Two of the highest profile examples in the last year were SVG Capital and Electra Private Equity, but other listed vehicles, such as JPEL Private Equity and Dunedin Enterprise Investment Trust, are also selling assets and returning capital.

SLEPET – or Standard Life Private Equity Trust as it will now be known – is not making these changes to its strategy as “defensive measures”, according to Graeme Gunn, head of investment monitoring at SL Capital Partners, who spoke to PEI in January before the shareholders approved the plans, “but we are mindful that we need to continue to make the strategy as resilient as we can for shareholders”, he said.

“We have had a good run on performance and we think these changes will allow us to broaden the opportunity set.”

The changes to the trust, which were first announced in December, include a move to a flat annual management fee structure equal to 0.95 percent of the net asset value. This replaces an existing management fee and incentive fee arrangement, under which the manager recently received a performance-related payment of £6.4 million, the firm said.
In its year-end report the company said its net assets were worth £533 million, based on valuations as of September 2016. This represented a 23 percent increase over a 12-month period.

Other changes include the removal of geographic and size restrictions on the underlying companies – hence the name change.

“The objective of the strategic changes is to broaden the private equity opportunity without diluting the strategy and focus which has delivered strong performance for investors over many years,” said Roger Pim, deputy head of SL Capital Partners. “Shareholders should not expect a radical shift on geographic exposures.”

As of Wednesday morning, the share price was 295 pence, representing a discount to new asset value of around 14 percent.