The retail route to secondaries

HarbourVest recently revealed plans to move its listed fund of funds HarbourVest Private Equity Limited (HVPE) to the Main Market of the London Stock Exchange later this year.

HVPE is one of a handful of listed fund of funds with exposure to secondaries. Its closest rival is probably Pantheon International Participations (PIP), Pantheon’s Main Market-listed investment trust that has a similar portfolio structure.

The main benefit to being listed on the LSE’s Main Market is access to retail investors, says HarbourVest associate director Richard Hickman. “The Main Market is effectively open to all investors.”

HVPE currently trades on the Specialist Fund Market where it can’t actively solicit shares to retail investors.

“As part of our Main Market listing we’ll conduct proactive road shows where we’ll try to capture investors,” he told Secondaries Investor. Educating retail investors about private equity as an asset class will be part of the initiative.

HVPE provides exposure to more than 700 private equity funds and commits to HarbourVest’s funds of funds, secondaries funds and a direct co-investment fund. Secondaries make up about 35 percent of the portfolio and Hickman says retail investors are typically quite interested in the strategy.

“They’re interested in our strategy because of HVPE’s track record of acquiring two other listed private equity funds,” he noted.

In 2011 HVPE invested alongside HarbourVest’s Dover Street VII to acquire Swiss-listed Absolute Private Equity for more than $800 million. The following year, HVPE and Dover Street VII bought Conversus Capital’s portfolio of private equity fund interests and direct investments for $1.4 billion.

“Each of those transactions added more than $1 per share of NAV,” Hickman said.

HVPE has recently been trading at a 19 percent discount to its $14.50 per share NAV, according to industry body LPEQ’s statistics.

Hickman says the firm is confident that joining the Main Market will generate wider investor activity for its listed product. He also thinks that of the listed funds currently trading, HarbourVest’s and Pantheon’s vehicles will be the only ones to meaningfully target secondaries in the short- to medium-term.

“I’ve heard of some firms interested in the area but they have much more limited exposure,” he says.