HarbourVest Global - Half-year Report
26/10/2023 07:00
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RNS Number : 3250R HarbourVest Global Priv. Equity Ltd 26 October 2023
26 October 2023
RESULTS FOR THE SIX MONTHS ENDED 31 JULY 2023
NAV per share reaches new high, with well-diversified portfolio demonstrating
significant resilience
HarbourVest Global Private Equity Limited ("HVPE" or the "Company"), a FTSE
250 investment company with global exposure to private companies, managed by
HarbourVest Partners, today announces its unaudited results for the six months
ended 31 July 2023.
Net asset value ("NAV") per share reaches new high, as highly diversified
portfolio delivers growth despite challenging markets
· NAV per share growth of 3.3% over the period to $50.12 (31
January 2023: $48.52).
· Well-diversified portfolio delivering consistent long-term
returns, with growth spread broadly across stage and strategy.
· Particular strength in buyout, secondary and European segments
over the period.
· NAV growth supplemented by profitable exits, with weighted
average uplift on carrying value of 32%(1).
Ongoing long-term outperformance of public markets
· Outperformance of FTSE All World Total Return (FTSE AW TR) Index
of 5.2% annualised over the past 10 years.
· Absolute NAV per share return of 286% over 10 years to 31 July
2023 vs FTSE AW TR Index of 142% over the same period.
PERFORMANCE AS AT 31 JULY 2023
1y 3y 5y 10y Since inception
(2007)
NAV per share ($)(2) 5% 78% 119% 286% 401%
Share price total return ($) 1% 47% 71% 199% 187%
Share price total return (£) -7% 47% 73% 249% 347%
FTSE AW total return ($) 14% 37% 52% 142% 157%
Annualised NAV per share outperformance vs FTSE AW TR Index ($)(3) -9% 10% 8% 5% 5%
1 These figures represent the weighted average percentage uplift to
carrying value of 33 individual company M&A and IPO transactions during
the six months ended 31 July 2023. This analysis takes each company's value
(whether realised or unrealised) at 31 July 2023 and compares it to the
carrying value prior to announcement of the transaction. This analysis
represents 85% of the total value of transactions in the six months ended 31
July 2023 and does not represent the portfolio as a whole. Additionally, it
does not reflect management fees, carried interest, and other expenses of the
HarbourVest funds or the underlying managers, which will reduce returns. Past
performance is not necessarily indicative of future returns.
2 Final unaudited NAV per share figures used (not July monthly
estimates).
3 '%' here refers to percentage point outperformance.
Net investor over the period
· A net $157 million cash invested (six months to 31 July 2022: $5
million).
o Total of $145 million cash distributions received (six months to 31 July
2022: $272 million).
o Total of $302 million capital calls paid (six months to 31 July 2022: $276
million).
· Buybacks totalling $25 million (£20 million) commenced during
half-year reporting period and completed in September 2023.
Strong balance sheet
· $221 million cash on balance sheet at 31 July 2023 (31 January
2023: $198 million).
· $600 million of $800 million credit facility remained undrawn at
31 July 2023, after $200 million draw in the reporting period to ensure ample
liquidity for capital calls.
· Total new commitments of $150 million over period (six months to
31 July 2022: $615 million).
· Latest balance sheet update can be found in the Monthly Update
for 30 September 2023
(https://www.hvpe.com/media/5uzllftk/30-september-2023-monthly-update.pdf) .
Signs of an improving outlook
· Encouraging macroeconomic datapoints, with inflation broadly
falling and interest rates stabilising.
· Exit environment improving, with uptick in M&A transactions
and IPOs in the past three months (last three month average of 28 vs LTM
average of 19).
· Positive returns from venture and growth equity, with managers
identifying opportunities in the next innovation cycle.
New share buyback and review of dividend policy
· The Board and Investment Manager have recently conducted a review
of the case for share buybacks using the established framework.
· Following this, the Board will conduct another share buyback and
intends to repurchase $25 million of shares.
· The Board plans to discuss with shareholders and non-holders to
explore the possibility of distributing to shareholders on a regular basis
some of the cash generated by realisations of HVPE's net assets, thereby
enabling direct participation in NAV growth.
Ed Warner, Chair of HVPE, said:
"HVPE's net asset value per share reached a new high in the first half against
a challenging macroeconomic backdrop. The return to growth in the period is
testament to the resilience of our well-diversified portfolio, which has been
constructed to mitigate downside risk and capture growth opportunities through
the cycle.
"We remain confident in our reported NAV and our strong balance sheet and
continue to encourage investors to look beyond the short term, given the
long-term nature of private markets investing. HVPE has a strong track record,
with NAV per share comfortably outperforming the FTSE All World Total Return
Index by 5.2% annualised over the past decade.
"We are encouraged by the tentative signs that the worst of the recent
macroeconomic adversity may be over, but remain prepared for a potentially
extended period of market and economic uncertainty. The experience of our
manager and expansive portfolio gives us conviction in HVPE's ability to
continue to deliver returns for shareholders over the long-term."
Semi-Annual Report and Accounts
To view the Company's Semi-Annual Report and Accounts please visit HVPE's
results centre: https://www.hvpe.com/shareholders/results-centre/
(https://www.hvpe.com/shareholders/results-centre/) . Page number references
in this announcement refer to pages in this report. The Semi-Annual Report and
Accounts will also shortly be available on the National Storage Mechanism,
which is situated at: https://data.fca.org.uk/#/nsm/nationalstoragemechanism
(https://data.fca.org.uk/#/nsm/nationalstoragemechanism)
Shareholder Webinar
There will be a presentation for shareholders on Monday, 30 October 2023 at
11:00AM GMT. To receive registration details for the event, please contact the
team at: hvpe_events@harbourvest.com (mailto:hvpe_events@harbourvest.com) .
Semi-Annual Results Presentation
HVPE will publish a new presentation on its website to supplement the
publication of the Semi-Annual Results for the six months ended 31 July 2023.
The presentation will be available to view and download from www.hvpe.com
(http://www.hvpe.com) at 11:00AM BST today.
- ENDS -
LEI: 213800NBWV6WWV8TOL46
Enquiries:
Shareholders
Richard Hickman Tel: +44 (0)20 7399 9847 rhickman@harbourvest.com (mailto:rhickman@harbourvest.com)
Media
HarbourVest Partners
Lily Cabianca Tel: +44 (0)20 7151 4261 lcabianca@harbourvest.com (mailto:lcabianca@harbourvest.com)
MHP
Charlie Barker / Tel: +44 (0)20 3128 8540 HVPE@mhpgroup.com (mailto:HVPE@mhpgroup.com)
Robert Collett-Creedy
Notes to Editors:
About HarbourVest Global Private Equity Limited:
HarbourVest Global Private Equity Limited ("HVPE" or the "Company") is a
Guernsey-incorporated, closed-end investment company which is listed on the
Main Market of the London Stock Exchange and is a constituent of the FTSE 250
index. HVPE is designed to offer shareholders long-term capital appreciation
by investing in a private equity portfolio diversified by geography, stage of
investment, vintage year, and industry. The Company invests in and alongside
HarbourVest-managed funds which focus on primary fund commitments, secondary
investments and direct co-investments in operating companies. HVPE's
investment manager is HarbourVest Advisers L.P., an affiliate of HarbourVest
Partners, LLC, an independent, global private markets asset manager with over
40 years of experience.
About HarbourVest Partners, LLC:
HarbourVest is an independent, global private markets firm with 40 years of
experience and more than $112 billion of assets under management as of June
30, 2023. Our interwoven platform provides clients access to global primary
funds, secondary transactions, direct co-investments, real assets and
infrastructure, and private credit. Our strengths extend across strategies,
enabled by our team of more than 1,150 employees, including more than 220
investment professionals across Asia, Europe, and the Americas. Across our
private markets platform, our team has committed more than $58 billion to
newly-formed funds, completed over $49 billion in secondary purchases, and
invested over $35 billion in directly operating companies. We partner
strategically and plan our offerings innovatively to provide our clients with
access, insight, and global opportunities.
This announcement is for information purposes only and does not constitute or
form part of any offer to issue or sell, or the solicitation of an offer to
acquire, purchase or subscribe for, any securities in any jurisdiction and
should not be relied upon in connection with any decision to subscribe for or
acquire any Shares. In particular, this announcement does not constitute or
form part of any offer to issue or sell, or the solicitation of an offer to
acquire, purchase or subscribe for, any securities in the United States or to
US Persons (as defined in Regulation S under the US Securities Act of 1933, as
amended ("US Persons")). Neither this announcement nor any copy of it may be
taken, released, published or distributed, directly or indirectly to US
Persons or in or into the United States (including its territories and
possessions), Canada, Australia or Japan, or any jurisdiction where such
action would be unlawful. Accordingly, recipients represent that they are able
to receive this announcement without contravention of any applicable legal or
regulatory restrictions in the jurisdiction in which they reside or conduct
business. No recipient may distribute, or make available, this announcement
(directly or indirectly) to any other person. Recipients of this announcement
should inform themselves about and observe any applicable legal requirements
in their jurisdictions.
The Shares have not been and will not be registered under the US Securities
Act of 1933, as amended (the "Securities Act") or with any securities
regulatory authority of any state or other jurisdiction of the United States
and, accordingly, may not be offered, sold, resold, transferred, delivered or
distributed, directly or indirectly, within the United States or to US
Persons. In addition, the Company is not registered under the US Investment
Company Act of 1940, as amended (the "Investment Company Act") and
shareholders of the Company will not have the protections of that act. There
will be no public offer of the Shares in the United States or to US Persons.
This announcement has been prepared by the Company and its investment manager,
HarbourVest Advisers L.P. (the "Investment Manager"). No liability whatsoever
(whether in negligence or otherwise) arising directly or indirectly from the
use of this announcement is accepted and no representation, warranty or
undertaking, express or implied, is or will be made by the Company, the
Investment Manager or any of their respective directors, officers, employees,
advisers, representatives or other agents ("Agents") for any information or
any of the opinions contained herein or for any errors, omissions or
misstatements. None of the Investment Manager nor any of their respective
Agents makes or has been authorised to make any representation or warranties
(express or implied) in relation to the Company or as to the truth, accuracy
or completeness of this announcement, or any other written or oral statement
provided. In particular, no representation or warranty is given as to the
achievement or reasonableness of, and no reliance should be placed on any
projections, targets, estimates or forecasts contained in this announcement
and nothing in this announcement is or should be relied on as a promise or
representation as to the future.
Other than as required by applicable laws, the Company gives no undertaking to
update this announcement or any additional information, or to correct any
inaccuracies in it which may become apparent and the distribution of this
announcement. The information contained in this announcement is given at the
date of its publication and is subject to updating, revision and amendment.
The contents of this announcement have not been approved by any competent
regulatory or supervisory authority.
This announcement includes statements that are, or may be deemed to be,
"forward looking statements". These forward looking statements can be
identified by the use of forward looking terminology, including the terms
"believes", "projects", "estimates", "anticipates", "expects", "intends",
"plans", "goal", "target", "aim", "may", "will", "would", "could", "should" or
"continue" or, in each case, their negative or other variations or comparable
terminology. These forward looking statements include all matters that are not
historical facts and include statements regarding the intentions, beliefs or
current expectations of the Company. By their nature, forward looking
statements involve risks and uncertainties because they relate to events and
depend on circumstances that may or may not occur in the future and may be
beyond the Company's ability to control or predict. Forward looking statements
are not guarantees of future performance. More detailed information on the
potential factors which could affect the financial results of the Company is
contained in the Company's public filings and reports.
All investments are subject to risk. Past performance is no guarantee of
future returns. Prospective investors are advised to seek expert legal,
financial, tax and other professional advice before making any investment
decision. The value of investments may fluctuate. Results achieved in the past
are no guarantee of future results.
This announcement is issued by the Company, whose registered address is BNP
Paribas House, St Julian's Avenue, St Peter Port, Guernsey, GY1 1WA
© 2023 HarbourVest Global Private Equity Limited. All rights reserved.
Chair's statement
Dear Shareholder,
The first half of 2023 saw little relief from the challenging macroeconomic
backdrop of 2022. March brought news of a regional banking crisis in the US,
while equity markets continued to struggle against the backdrop of tighter
credit conditions, persistent inflation and interest rates not seen for over a
decade. More recently there have been tentative signs that the worst may be
over, but we must acknowledge that we are living in difficult times which will
likely continue to challenge investors in the near term.
HVPE's net asset value per share reached a new high in the first half, closing
the period at $50.12 as of 31 July 2023. However, we recognise that the share
price remains a long way short of this figure. Investment companies in general
have struggled with wider discounts in recent months, and the listed private
equity sector has been impacted more than most. In part, this is due to
technical factors such as persistent selling by UK-focused index tracker
funds, of which HVPE and some of its peers are constituents, but we
acknowledge that there has been a degree of scepticism over reported NAVs in
the sector. As a Board, we remain resolute in our conviction that HVPE's
published NAV figure is the result of rigorous valuation processes at each
level in the structure, and is an accurate reflection of the economic value of
our underlying investments. Further reassurance is provided by the fact that,
on average, HVPE's investments have continued to be realised at a premium to
carrying value.
We are grateful to all who have continued to hold HVPE's shares over the long
term, as well as those who have joined the register more recently. We thank
you for your support and would like to reassure all our investors that we
continue to believe HVPE is well-positioned to deliver strong returns in the
years ahead.
Financial performance
I am pleased to report that HVPE's NAV per share was $50.12 at 31 July 2023,
having increased by 3.3% in the six-month period. This surpasses the previous
high of $49.11 recorded at 31 January 2022, around the time markets started to
weaken, demonstrating significant resilience. In the six months under review,
the FTSE All World Total Return Index gained 10.4%, giving a relative
underperformance by HVPE of 7.1 percentage points. Private markets have
historically proved to be less volatile than public markets - both on the way
down and on the way up. HVPE's NAV lagged public markets on the way down,
thereby outperforming very significantly (as reported in our 2023 Annual
Report and Accounts); similarly we should expect a lag on the way up. We
encourage investors to evaluate HVPE's performance over a number of years,
because private markets are inherently long-term in nature. Over the 10-year
period ended 31 July 2023, HVPE has delivered a +286% NAV per share return and
outperformed the FTSE AW TR index by 5.2 percentage points on an annualised
basis.
The key drivers for the 3.3% growth in NAV per share over this reporting
period were spread broadly across stage and strategy, with particular strength
in the buyout, secondary and European segments of our portfolio. Any
short-term variability in performance by stage, strategy and region in the
period provides further support for our contention that a well-diversified
portfolio is critical in delivering consistent overall returns, as different
asset classes tend to perform well at various points in the macroeconomic
cycle.
The resumption in growth of NAV per share is further supplemented by continued
encouraging news on exits. While exit volume and value were below normal
levels during the period, the weighted average uplift on carrying value at
exit was 32%, continuing a well-established trend that has persisted for more
than 12 consecutive years. More recently in our monthly estimated NAV updates,
we have seen tentative signs of an uptick in exit activity.
Share price and discount management
Whilst we are pleased with a 10-year share price total return figure of +249%,
we acknowledge the share price growth in the six months to 31 July 2023 of
+1.8% has not meaningfully narrowed the discount, which remains wide at 42%.
We believe we are in the midst of a perfect storm, with a combination of
factors weighing heavily not only on our own share price but also those of our
peers in the listed private equity sector and beyond. Principal among these
factors are the challenge of sluggish growth at the macro level, persistent
inflation and dramatically higher short-term interest rates as the world
adjusts to the end of the easy money environment that prevailed after 2008. In
addition we have also suffered from adverse equity trading flows driven by
redemptions from open-ended investment funds, and sales on the part of index
tracker funds, which affect HVPE due to its inclusion in the FTSE 250 and FTSE
All Share indices. Finally, there is the overriding concern about the accuracy
of published NAVs across private market funds at a time of elevated economic
and market uncertainty. These headwinds are frustrating for the Board and,
doubtless, all shareholders, especially given our confidence in the accuracy
of the valuations underpinning HVPE's NAV and the quality of the funds and
companies in which we are invested.
Addressing the current wide discount
The Board is acutely conscious of the persistence and scale of HVPE's discount
to NAV. We are at all times desirous of providing the best possible experience
for all our shareholders by ensuring that they benefit fully from the
Company's track record of impressive capital appreciation.
While other investment companies have in recent months undertaken a range of
actions, the Board has consulted extensively with its advisers and considered
a wide suite of options and possibilities. As a result of this rigorous
exercise it is clear to us that preserving balance sheet strength is, and will
continue to be, critical to the Company's ability to deliver capital growth at
the levels that shareholders have come to expect.
At this juncture, it is vital that we maintain a long-term perspective and not
allow ourselves to become unduly distracted by volatility in the public
markets. The Board believes strongly that, for the long term, our existing
approach is optimal.
Share buybacks
When HVPE has capacity from portfolio realisations, we will continue to
evaluate the potential benefits of deploying cash via share buybacks, with
reference to our established framework. Following a recent review, I am
pleased to announce a further allocation of $25 million to share repurchases,
following on from the $44 million deployed in this way since September 2022.
Review of dividend policy
The Board is pleased by the evolution of the share register in recent years,
and notes the increased presence of wealth managers and retail investors in
particular. As interest rates normalise, there is potentially an increased
expectation among our shareholders that a long-term investment could provide
income in addition to strong capital growth.
To this end, the Board plans to discuss with shareholders and non-holders on
this issue and explore the possibility of distributing to shareholders on a
regular basis some of the cash generated by realisations of our assets,
thereby enabling direct participation in NAV growth. Any potential cash
distribution would be funded from capital as it is realised from the invested
portfolio, in line with HVPE's core strategy of delivering long-term capital
growth in excess of public markets through the cycle.
The Board will only decide to introduce dividend payments funded by
realisations if it concludes that this is clearly in the best interests of
shareholders over the long term. We will complete our deliberations with care
and make a further announcement in due course.
Balance sheet and portfolio cash flows
HVPE was a net investor in the six months to 31 July 2023 by $157 million, as
our portfolio mirrored the wider industry trends of a combination of resilient
dealmaking and slow exit activity, which is explained in more detail in the
Investment Manager's Report on pages to 17 to 21. Whilst this lays the
groundwork for continued strong portfolio performance over the long-term, this
does place a demand on HVPE's cash reserves in the short-term. As a prudent
measure we drew $200 million on our credit facility in the reporting period to
ensure ample liquidity for capital calls. As at 31 July 2023, HVPE had $221
million of cash on the balance sheet, a small increase from the $198 million
at 31 January 2023, noting however that on the earlier date, the Company's
full $800 million credit facility was undrawn. This means HVPE's net cash
position fell from $198 million to $21 million over the period.
Aside from cash flows related to HVPE's portfolio, the remainder of the
decline in the net cash balance is largely a result of the second buyback
programme. At 31 July 2023, HVPE repurchased 685,568 shares for cancellation
at an average price of £20.76 per share for a total consideration of £14
million ($18 million). This added $0.20 to NAV per share. The remaining $7
million of the announced $25 million of buybacks was completed post period-end
in September 2023. Inclusive of the post period-end buybacks, this means that
in total, HVPE repurchased 920,568 shares for cancellation at an average price
of £21.54 per share for a total consideration of £20 million ($25 million).
This exercise in full added $0.26 to NAV per share.
Marketing and shareholder engagement
HVPE announced a brand refresh over the summer of 2023 to create a distinct
and modern look that we hope will resonate with investors. This was first
reflected in our 2023 Annual Report and Accounts, and has since been extended
to our updated website and marketing collateral. Our top 25 company exposures
are now published on our website and updated on a monthly basis, in a move
designed to give shareholders more visibility into our underlying portfolio.
The Board believes that effective and regular communication is critical to
improve understanding, ensure shareholders are up-to-date on Company activity,
and to answer your pressing questions. It was a great pleasure to meet many of
you at our Hybrid Capital Markets Session in June 2023. Alongside such
sessions, our quarterly newsletter, and regular investor roadshows and
industry events, we hope you have been able to access HVPE in a meaningful
way, and we remain available to answer any queries you may have.
Company prospects and outlook
We are encouraged by the tentative signs that the worst of the recent
macroeconomic adversity may be over, but remain prepared for a potentially
extended period of market and economic uncertainty. While a technical
recession has so far been avoided in most major economies, slow economic
growth coupled with sticky inflation is likely to act as a headwind for
conventional public equity portfolios. This is an environment where private
markets can flourish, and throughout the history of both HVPE and HarbourVest
Partners - over 15 and 40 years respectively - we have seen many periods of
economic dislocation which, as HarbourVest notes, confers an ability to
recognise patterns that then inform portfolio construction choices.
We remain confident in our strong balance sheet and our reported NAV, which
shows the resilience of HVPE's well-diversified portfolio during challenging
periods. Our broad and expansive portfolio - spanning stage, strategy, vintage
year, industry and geography - gives us conviction in our ability to continue
to mitigate downside risk while delivering long term returns for our
shareholders.
Ed Warner
Chair
25 October 2023
Principal risks and uncertainties
Risk Factors and Internal Controls
The Board is responsible for the Company's risk management and internal
control systems, and actively monitors the risks faced by the Company, taking
steps to mitigate and minimise these where possible. Further details on the
Board's governance and oversight can be found on pages 78 to 99 of the 2023
Annual Report and Accounts.
Risk Appetite
The Board's investment risk appetite is to follow an over-commitment policy
that allows balanced, regular investment through economic and investment
cycles whilst ensuring that it has access to sufficient funding for any
potential negative cash flow situations, including under an Extreme Downside
scenario. At the same time, the funding available to the Company by way of
cash balances and lending facilities is managed to ensure that its cost, by
way of interest, facility fees, or cash drag, is reasonable. When considering
other risks, the Board's risk appetite is to balance the potential impact and
likelihood of each risk with the cost of any additional control and mitigation
measures. In doing so, as a baseline, the Board will seek to follow best
practice and remain compliant with all applicable laws, rules, and
regulations.
Risk Management
The Directors have adopted a risk management framework to govern how the Board
identifies existing and emerging risks, determines risk appetite, identifies
mitigation and controls, assesses, monitors and measures risk, and reports on
risks. The Board reviews risks at least twice a year and receives deep-dive
reports on specific risks as recommended by the Audit and Risk Committee. The
Board divides identified risks into those which have a higher probability and
a significant potential impact on performance, strategy, reputation, or
operations, and those which are less material and are monitored on a
watchlist. The Board also conducts an annual exercise to identify new or
emerging risks. In considering material risks, the Board identified those
which should be categorised as principal risks, which are those where the
combination of probability and impact was assessed as being most significant
and which the Board therefore considers could seriously affect the
performance, future prospects, or reputation of the Company.
Risk Commentary
As explained in more detail in the Investment Manager's Report that follows,
during the period under review and subsequent to the period end, the
macroeconomic and geopolitical environment remained challenging. With
expectations of interest rates remaining 'higher for longer', alternative
asset classes generally and listed private equity in particular have suffered
from negative market sentiment. Consequently, the share price discounts to NAV
per share of listed closed-ended funds, including HVPE, remain stubbornly
wide. The Company's principal risks as listed below are unchanged in the
period but are heightened in this environment.
The Directors continue to closely monitor cash flows relative to modelled
scenarios and have been cautious in making further commitments to HarbourVest
funds. However, the underlying strength of the Company's balance sheet allows
it to ride out such a market environment and continue to invest in
opportunities as they arise. This includes committing to new private market
opportunities as well as buying back the Company's shares as explained on page
4. See also pages 27 to 28 for the Directors' assessment regarding Going
Concern.
Principal Risk Description
Balance Sheet Risks Risks to the Company's balance sheet resulting from its over-commitment
strategy and its policy for the use of leverage.
Popularity of Listed Private Equity Sector The risk that investor sentiment may change towards the listed private equity
sector as a whole with consequent pressure on share price discounts relative
to NAV per share across the peer group.
Valuation Risk The risk that market instability leads to continuing uncertainty in private
asset valuations based on listed comparables, together with general market
scepticism about the likely movement in valuation.
Public Market Risks The risk of a decline in global public markets or a deterioration in the
economic environment.
Performance of HarbourVest The risk posed by the Company's dependence on its Investment Manager.
Trading Liquidity and Price The risk that an insufficient number of shares in the Company are traded,
widening the discount of the share price relative to the NAV per share.
ESG Risk The risk that the Company or the Investment Manager fails to respond
appropriately to the increasing global focus on Environmental, Social and
Governance ("ESG") issues.
Investment Manager's Review
In this section, Richard Hickman, Managing Director, HVPE, who is responsible
for the day-to-day management of the Company, reflects on the first six months
of the financial year and shares his outlook. Richard joined HarbourVest in
2014 and has a total of 17 years' experience in the listed private equity
sector.
Introduction
After a challenging 2022, investors welcomed the beginning of 2023 with a
degree of cautious optimism. Yield-focused and inflation-resistant investments
continued to perform relatively well, and there was hope the IPO market would
return during the year. There was a sense that 2023 would bring opportunities
centred around new themes and the adoption of technology (most notably,
artificial intelligence), and an acknowledgement that history tells us that
periods of market dislocation are when private markets perform at their best
relative to public markets¹. There was also a revival in the technology
sector alongside a wider stock market revival, with US large-caps recording Q1
2023 earnings that exceeded analyst estimates², leading to the S&P 500
Information Technology Index outperforming relative to the wider S&P 500
Index by the largest margin since 2009³.
That early optimism was swiftly curtailed with events surrounding Credit
Suisse, Silicon Valley Bank and other regional US banks, as interest rates
continued to rise. Fortunately any potential repercussions have been
contained, with markets resuming a broadly positive trajectory in recent
months. Rising interest rates have provided a headwind to asset prices in most
sectors, and conditions in the credit markets have undoubtedly tightened,
leading asset managers to re-visit assumptions formed in the long decade of
ultra-low interest rates following the Global Financial Crisis of 2008.
In light of all this, it seems clear that the power of diversification cannot
be overstated as evidenced by our NAV performance over the period. HVPE's
exposure across buyout, venture and growth equity, credit and real assets,
each with their own specific dynamics, helps to mitigate the downside risk
whilst capturing strong performance at different parts of the macroeconomic
cycle. Coupled with a diverse geographical, sector and vintage year split of
the portfolio - and all underpinned by an investment manager with over 40
years' experience - HVPE is well-positioned to weather any macroeconomic
shock. Over the long term, portfolio growth has been very strong, as
demonstrated by a +401% NAV per share return since our inception in December
2007 (compared to +157% for public markets over the same time period), though
we are frustrated that the resilience we are showing at the NAV level is not
reflected in the share price.
Share price performance
Whilst the material declines in the public equity indices seen in 2022 did
not, thankfully, continue in the first half of 2023, we must acknowledge the
persistent headwind facing listed private equity funds as a result of rising
interest rates and a renewed focus on yield. A share price return for HVPE of
+1.8% in the half-year (£22.10 at 31 January 2023 and £22.50 at 31 July
2023) shows a degree of resilience, but this figure in isolation obscures the
short-term volatility that still frustrates us on a day-to-day basis. At
various points in the reporting period, HVPE's share price ranged from -13%
since financial year-end (£19.30 on 22 March 2023) to +5.7% (£23.35 on 20
July 2023), and we acknowledge the unease this may cause some shareholders. It
is therefore critical to remind investors of the long-term nature of private
markets investing, and that HVPE is intended for long-term investment. Share
price progression is never linear, particularly over the short-term, and as a
FTSE 250-listed investment company, we acknowledge HVPE shares are often
traded as part of a "UK basket" (despite 94% of the HVPE portfolio being
invested in non-UK companies). This therefore makes HVPE's shares susceptible
to negative investment flows arising from unfavourable political and
macroeconomic events beyond the Company's control. However, our 10-year share
price return of +249% should give shareholders comfort in the power of
continuing to back private companies through macroeconomic cycles.
Private markets industry⁴
Private markets activity has slowed in the first half of 2023 from the records
set in 2021 and 2022. As noted by Pitchbook, US deal volumes have declined in
four of the last six quarters, down 24% by deal count and 49% by deal value
since peaking in Q4 2021. It is a similar story in Europe, where if the deal
numbers seen in the first half of 2023 are maintained for the rest of the
year, 2023 totals will be around 24% below the levels set in 2022.
( )
Fundraising has also been challenging, with the numbers for the first half of
2023 in the US coming in at 15-25% below last year's pace based on the number
of funds closed and the final sizes of these closed funds. The picture is
mixed when viewed through different lenses - infrastructure in particular has
seen a steep drop-off in funds raised compared with 2022(5), but a silver
lining is that the European fundraising environment remains strong and is in
fact on track to exceed 2022's total.
Exits (or lack thereof) are a symptom, rather than cause, of the negative
investor sentiment. Quarterly exit value in Q2 2023 was flat or down for the
seventh consecutive quarter in the US, as the continued uncertainty of the
macroeconomic outlook led sponsors to wait for improved sentiment among
prospective buyers. Perspective is important here; the US PE industry overall
delivered the equivalent of approximately 2.6 years of exit value in a single
year in 2021(6), and so the consistent quarterly decline noted points both to
a weak 2023 environment as well as an unusually positive 2021 environment.
One growing exit route is GP-led secondaries, allowing sponsors to roll
portfolio companies out of their original fund and into a new vehicle which,
in turn, provides the option of a partial or full cash exit to existing LPs.
This allows GPs to continue to add value to well-calibrated assets without
being forced by the constraints of a single fund lifecycle to sell assets at
an inopportune time. The growth of this portion of the secondaries market in
recent years is evidenced by the fact it now represents approximately half of
annual secondaries transaction volume, having outnumbered LP secondaries for
the first time in 2020(7). Despite this development, Pitchbook notes that the
exit-to-investment ratio overall in the US has fallen compared to previous
years, and we must take heed of this and its impact on our net portfolio cash
flow, which was a negative $157 million in the first half of the financial
year.
Themes and outlook
Return of venture and opportunities in the coming cycles
As reported in the Annual Report and Accounts 2023, the Venture & Growth
Equity portion of the portfolio declined in value by 11.8% in the 12 months to
31 January 2023, with the decline spread broadly across all sub-categories as
managers made downward adjustments to some venture investments that had seen
outsized valuation gains during the course of 2020 and 2021, and as publicly
traded shares held after IPOs declined in price. After several quarters of
valuation adjustments, the stage overall recovered with a modest 1.7% gain
over the six months. This was driven across all sub-categories, with growth
equity delivering a 2.7% gain, balanced venture +2.2%, and early venture
+0.2%. This represents a degree of stabilisation after a weak 12 months to 31
January 2023. It is again important to zoom out on venture performance and
understand that, despite the last financial year underperforming as noted
above, it represented an unwind of only 16% of the total cumulative gains
recorded over the five years prior, cementing it as an important component of
our portfolio which we will continue to back.
This is especially true when we consider the potential for this stage in the
future. Our venture team highlight the importance of innovation cycles and
reflect that the long-term outcomes achieved by truly great businesses are
less impacted by the kind of short-term factors that we are experiencing
today(8). We might consider as examples companies such as Google, Facebook,
Uber, Salesforce, Workday, Zoom, Airbnb, Slack, Instagram, Wise and Farfetch -
all of which have been in HVPE's portfolio at various points in time - and
many of which were conceived and/or developed during times of macroeconomic
headwinds yet represent some of the most successful venture-backed companies
ever created. Venture and growth equity continues to contribute substantially
to our exit activity, representing half of all M&A transactions and IPOs
in the six months to 31 July 2023, as explained more on page 19.
Indeed, the next innovation cycles, such as artificial intelligence and
cybersecurity, are often incubated by venture capital. At HarbourVest, the key
is being able to work with managers that have been early leaders in AI who can
cut through the noise to find the next generation of leaders across these
disruptive technologies. As always, skilful manager selection is critical to
maximising expected returns of a private market portfolio - and access to top
managers is especially important for venture capital, which tends to have a
wider return dispersion than other private market segments and public
markets(9). The opportunity set is expansive and wide-reaching, with potential
to have impact across sales and marketing, legal tech, health tech, life
sciences, fintech, cybersecurity, and beyond. HVPE has exposure to hundreds of
AI-related companies - Arctic Wolf (AI cyber-crime), Grammarly (AI writing),
Harbinger Health (AI detecting early-stage cancers), to name a few - and with
31% of the HVPE portfolio in venture and growth equity as at 31 July 2023, we
are well-positioned to capture this trend, not just directly but also
indirectly, as non-venture segments of the portfolio are also likely to be
indirectly enhanced by AI through efficiency gains and enhancements in
products or services. Marc Andreessen(10) of Andreessen Horowitz, our
10th-largest manager as at 31 July 2023 and the person who wrote the piece
"Why Software Is Eating the World" back in 2011(11), is as optimistic this
time about AI, stating that "what AI offers us is the opportunity to
profoundly augment human intelligence". He contrasts this with the claims that
it will "ruin our society, take all our jobs and cause crippling
inequality". We note his views that, firstly, "a worker in a
technology-infused business will be more productive than a worker in a
traditional business", and secondly that "productivity growth throughout the
economy will accelerate dramatically, driving economic growth, creation of new
industries, creation of new jobs, and wage growth, and resulting in a new era
of heightened material prosperity across the planet".
Outlook
Regardless of any one emerging trend, the composition of HVPE's portfolio
leaves it well positioned to benefit from continued strong performance over
the long term. Primary funds - the bedrock of HVPE's portfolio construction
(50%) - call capital over a multi-year timeframe and to some extent shield
HVPE from short-term macroeconomic concerns. It ensures HVPE secures new
investment opportunities through the cycle, providing access to leading
private equity managers - hundreds of teams of experts focusing on their
specific niches. Coupled with encouraging macroeconomic datapoints - inflation
subsiding, interest rates stabilising - the current environment offers real
potential for investors willing and able to deploy capital into the most
attractive opportunities. Over HarbourVest's 40-year history, it has witnessed
multiple periods of economic dislocation, including the 1991 Gulf War, the
1999/2000 technology bubble, the Global Financial Crisis and the COVID-19
pandemic. These experiences inform HarbourVest's portfolio construction
choices going forward. This stands HVPE in good stead, and we are confident we
will continue to outperform public markets over the long term.
1 "2023 Private Markets Outlook", BlackRock, December 2022.
2 "Tech giants' revenues are on the mend in 2023", Trustnet, April
2023.
3 "Tech Surge Sends Valuations to Extremes, but Traders Don't Care",
Bloomberg, April 2023.
4 "Q2 2023 US PE Breakdown" and "Q2 2023 European PE Breakdown",
Pitchbook, July 2023.
5 "Q3 2023 Quantitative Perspectives: US Market Insights",
Pitchbook, August 2023.
6 "PE Exit Timelines and the Impending Maturity Wall", Pitchbook,
June 2023.
7 "Global Secondary Market Review", Jefferies, January 2023.
8 "Catch the next wave: Innovation cycles continue to create
compelling opportunities in venture capital", HarbourVest Partners, August
2023.
9 Source: Burgiss, Bloomberg, HarbourVest as December 31, 2021.
Returns are 10-year IRRs for private assets and 10-year annualised compound
returns for public market assets. Public Equity reflects Bloomberg universe of
223 US-registered global equity mutual funds. Past performance is not a
reliable indicator of future results.
10 "Why AI Will Save the World", Marc Andreessen, June 2023.
11 "Why Software Is Eating the World", Marc Andreessen, August 2011.
Richard Hickman
Managing Director
Investment Manager's report
NAV per share - Six Months to 31 July 2023
HVPE's NAV per share increased by 3.3% in the six months to 31 July 2023,
ending the first half of the financial year at $50.12, surpassing the peak of
$49.11 recorded at 31 January 2022. Meanwhile, the FTSE AW TR Index (in US
dollars), rose by 10.4% in the same period as public markets rebounded
strongly after a tumultuous 2022.
Over longer timeframes, HVPE's NAV per share return has been very strong. The
31 July 2023 figure of $50.12 is more than double the NAV per share figure
reported five years earlier (31 July 2018: $22.93) and represents a near
four-fold increase from the respective figure 10 years earlier (31 July 2013:
$12.98). As a reminder, these figures are net of all fees and costs.
HVPE remains well diversified by sector, as demonstrated by the analysis
on page 21. We believe that diversification in general is essential to
achieving consistently strong returns from a private markets portfolio. As at
31 July 2023, no single company represented more than 2.2% of the Investment
Portfolio value (31 January 2023: 2.4%), helping to mitigate company-specific
risk. The top 100 companies in the portfolio represented 28% of total value
(31 January 2023: 29%), while the top 1,000 companies represented 80% (31
January 2023: 81%).
In percentage terms, the Secondary portfolio was the best performing strategy,
delivering value growth of 5.3% over the six months. Geographically, North
America and Europe performed strongly, delivering a return of +4.0% and +6.8%
respectively. In terms of stage, buyout was the strongest performer, growing
5.3% over the six months ended 31 July 2023, and we note an encouraging return
to growth for the venture and growth equity segment, which grew 1.7% over the
six months to 31 July 2023 after a volatile 2022. More information on the
drivers can be found on page 23.
As at 31 July 2023, HVPE held investments in 62 HarbourVest funds and 16
secondary co-investments(1) (compared with 61 and 16, respectively, at 31
January 2023). Of these, the largest fund contributors to NAV per share
movement in absolute terms during the six months to 31 July 2023 are described
below:
· Fund XII Buyout, a US-focused buyout fund of funds, was the
largest contributor over the reporting period, adding $0.17 to NAV per share.
With a vintage year of 2021, this fund is in its investment phase. The
increase came predominantly from unrealised gains.
· Dover XI, a global secondary fund, was next largest in absolute
terms, increasing NAV per share by $0.16. With a vintage year of 2022, this
fund is in its investment phase. The increase came predominantly from
unrealised gains.
· Fund X Buyout, a US-focused buyout fund of funds, was the third
largest contributor over the reporting period, adding $0.13 to NAV per share.
With a vintage year of 2015, this fund is in its growth phase. The increase
was split approximately equally across realised and unrealised gains.
· Fund XI Buyout, a US-focused buyout fund of funds, was next in
absolute terms, increasing NAV per share by $0.11. With a vintage year of
2018, this fund is in its growth phase. The increase came predominantly from
realised gains.
· Dover X, a global secondary fund, was the fifth largest
contributor over the reporting period, adding $0.08 to NAV per share. With a
vintage year of 2019, this fund is in its investment phase. The increase came
predominantly from unrealised gains.
All of the remaining HarbourVest funds in the portfolio combined contributed
to an aggregate $1.01 increase to HVPE's NAV per share over the six-month
period.
Fund Movement(2)
NAV per Share at 31 January 2023 $48.52
Fund XII Buyout +$0.17
Dover XI +$0.16
Fund X Buyout +$0.13
Fund XI Buyout +$0.11
Dover X +$0.08
Other HarbourVest Funds(3) +$1.01
Management Fees(4) -$0.14
Performance Fees(5) -$0.14
Net Operating Expenses(6) -$0.08
Foreign Currency +$0.10
Share Buybacks +$0.20
NAV per Share at 31 July 2023 $50.12
1 These include four Secondary Overflow III investments, 11
Secondary Overflow IV investments, and Conversus, referred to as "HVPE
Charlotte Co-Investment L.P." in the Unaudited Condensed Interim Consolidated
Schedule of Investments.
2 Realised and unrealised gains are shown net of management fees,
performance fees, and foreign currency in the Unaudited Condensed Interim
Consolidated Statements of Operations.
3 Realised gain/value changes from the balance of 57 other
HarbourVest funds and 16 secondary co-investments in the Investment Portfolio.
4 Management fees include management fees from HarbourVest Funds and
secondary co-investments as shown in the Unaudited Condensed Interim
Consolidated Statements of Operations ($59k).
5 Please refer to page 11 for more information on the performance
fees.
6 Operating expenses exclude management fees ($59k) and are shown
net of interest and other income ($5,237k).
Portfolio Cash Flows and Balance Sheet
In the six months to 31 July 2023, HVPE received cash distributions of $145
million (six months to 31 July 2022: $272 million) while funding capital calls
of $302 million for new investments (six months to 31 July 2022: $276
million). The result was negative net portfolio cash flow of $157 million over
the reporting period. As a prudent measure to ensure that HVPE had sufficient
liquid resources to meet its near-term obligations, and in light of events in
the banking sector occurring around that time, HVPE initiated a draw of $200
million on its credit facility in March 2023, with the cash received on 18
April 2023. Taking this into account, HVPE's cash balance increased from $198
million as at 31 January 2023 to $221 million as at 31 July 2023, with $600
million of the $800 million credit facility remaining undrawn.
Distributions were driven in large part by a particularly strong month in June
2023, during which cash proceeds of $68 million were received, mainly from the
Primary funds. This contributed nearly 50% of the total distributions over the
period. Negligible distribution amounts were received in May and July ($6
million collectively), with the remainder received in February to April ($71
million).
The largest HarbourVest fund capital calls and distributions over the
reporting period are set out in the tables below. The top ten fund calls in
aggregate accounted for $236 million (78%) of the total calls, and came from a
broad mix of HarbourVest funds. The majority of total calls by value (82%)
were into primary opportunities. The top ten HarbourVest fund distributions
totalled $94 million, or 65% of the total proceeds received in the period.
Distributions by value were split between primary investments (59%) and
secondary investments (28%), with the remainder coming from direct
co-investments.
Top Five HarbourVest Fund Calls
HarbourVest Fund Name Vintage Year Description Called amount
Fund XII Buyout 2021 US-focused buyout fund of funds $69m
HIPEP IX 2020 International multi-strategy fund of funds $34m
Co-Investment VI 2021 Global direct co-investment fund $31m
Fund XI Buyout 2018 US-focused buyout fund of funds $18m
Dover XI 2022 Global secondary fund $15m
Top Five HarbourVest Fund Distributions
HarbourVest Fund Name Vintage Year Description Distributed amount
HarbourVest Infrastructure Income Partnership 2022 Global infrastructure and real assets fund $22m
HIPEP VII Partnership Fund 2014 International multi-strategy fund of funds $15m
HIPEP VII Europe Fund 2014 International multi-strategy fund of funds $13m
Fund XI Buyout 2018 US-focused buyout fund of funds $11m
2013 Direct Fund 2013 Global direct co-investment fund $8m
M&A Transactions and IPOs
During the six months ended 31 July 2023, there were a total of 153 known
Merger & Acquisition ("M&A") transactions and IPOs. This is an
increase compared to the six months to 31 July 2022, and reflects tentative
signs of a rebound in exit activity after a volatile 2022.
Approximately 86% (132) of these transactions were M&A (trade sales or
sponsor-to-sponsor) transactions, with the remaining 14% (21) being IPOs. It
is important to note that IPOs tend to represent a relatively small proportion
of exits for HVPE even in normal circumstances, consistent with wider industry
trends.
Of HVPE's total 153 known M&A transactions and IPOs, 44% (68) related to
buyout-backed companies and 50% (76) to venture-backed companies. The
remainder (6%, or 9) related to mezzanine and infrastructure and real assets
companies.
Over the six-month period, the weighted average uplift to pre-transaction
carrying value for a large sample of transactions was 32%(1).
The top five M&A transactions and IPOs during the period (by contribution
to HVPE NAV per share) are listed below.
Top Five M&A transactions
(by contribution to HVPE NAV per share(2))
Company Stage Industry
Reward Gateway Other Tech & Software +$0.04
LeasePlan Corporation Buyout Financial +$0.03
Groundworks, LLC (formerly JES Construction) Buyout Industrial & Transport +$0.03
Tuskerdirect Limited Buyout Business Services & Other +$0.03
Global Assekuranz Group Venture Financial +$0.02
Top IPOs
(by contribution to HVPE NAV per share(3))
Company Stage Industry
YaoShiBang Venture Medical & Biotech +$0.03
Savers, Inc. Other Business Services & Other +$0.02
Acelyrin Venture Medical & Biotech +$0.01
No other IPO contributed more than +$0.01 to NAV per share
No other IPO contributed more than +$0.01 to NAV per share
1 These figures represent the weighted average percentage uplift to
carrying value of 33 individual company M&A and IPO transactions during
the six months ended 31 July 2023. This analysis takes each company's value
(whether realised or unrealised) at 31 July 2023 and compares it to the
carrying value prior to announcement of the transaction. This analysis
represents 85% of the total value of transactions in the six months ended 31
July 2023 and does not represent the portfolio as a whole. Additionally, it
does not reflect management fees, carried interest, and other expenses of the
HarbourVest funds or the underlying managers, which will reduce returns. Past
performance is not necessarily indicative of future returns.
2 As measured since the announcement of the transaction or IPO
filing.
3 As measured since the announcement of the transaction or IPO
filing.
Company Activity
New Fund Commitments
In the six months ended 31 July 2023, HVPE made total commitments of $150
million across two HarbourVest funds (six months to 31 July 2022: $615
million). Total unfunded commitments were $2.7 billion as at 31 July 2023,
representing a net decrease of $152 million from 31 January 2023 ($2.8
billion).
Of the total capital committed in the period, the largest commitment ($125
million, or 83%) was made to an international multi-strategy fund of funds. A
complete list of the commitments can be found on page 22. These remain in
line with the Company's Strategic Asset Allocation targets and reflect the
Investment Manager's and Board's current perspective on the most appropriate
portfolio composition required to optimise long-term NAV growth
for shareholders.
Share Buybacks
As communicated in the Annual Report and Accounts 2023, after a further review
of share buybacks over the summer months of 2023, all criteria in HVPE's
framework were satisfied and the Board announced its intention to conduct a
second share buyback to repurchase up to $25 million of the Company's shares.
In the six months to 31 July 2023, our joint brokers Jefferies and Peel Hunt
between them bought back 685,568 shares for cancellation at an average price
of £20.76 per share for a total value of £14.2 million ($18.2 million). This
added $0.20 to NAV per share.
As further elaborated in Recent Events on page 25, the remaining $7 million of
the announced $25 million of buybacks was completed post period-end in
September 2023. Inclusive of the post period-end buybacks, this means that in
total, HVPE repurchased 920,568 shares for cancellation at an average price of
£21.54 per share for a total consideration of £19.8 million ($25.0 million).
This exercise in full added $0.26 to NAV per share.
Credit Facility
As noted above, as a prudent measure to ensure that HVPE had sufficient liquid
resources to meet its near-term obligations, and in light of events in the
banking sector occurring around that time, HVPE initiated a draw of $200
million on its credit facility in March 2023, with the cash received on 18
April 2023.
HVPE's Approach to ESG and DEI
Through its investments in HarbourVest funds, HVPE helps to support innovation
and growth in the global economy whilst seeking to promote improvement in
environmental, social, and governance standards. For the most part, HVPE
delegates the responsibility of ESG at the investment level to HarbourVest,
yet regularly engages with the Investment Manager to stay fully abreast of its
activity.
During the half year period, HVPE offset its operational carbon emissions
resulting primarily from purchased electricity, waste, and business travel,
simultaneously with HarbourVest's carbon reduction and offsetting programme.
The programme compensates for emissions by delivering finance to emission
reduction projects, which are independently verified by ClimeCo to assure
emissions reductions are occurring. To offset its emissions, HVPE supported
the New Bedford Landfill Methane Project operating local to HarbourVest's
headquarters in Massachusetts, a landfill gas-to-energy plant which produces
approximately 3.3 megawatt hours of clean electricity while reducing the
amount of methane released into the atmosphere.
HarbourVest continues to progress on its ESG strategy and expects to publish
an updated ESG report later in 2023. HVPE will report more detail on the
developments in next year's Annual Report and Accounts which will be published
in May 2024.
In addition, for the second year, HarbourVest has produced a Diversity and
Inclusion Report, available at
https://www.harbourvest.com/insights-news/insights/harbourvest-dei-report-2023
(https://www.harbourvest.com/insights-news/insights/harbourvest-dei-report-2023)
.
Diversification at 31 July 2023(1)
Geography
North America 62%
Europe 22%
Asia 14%
Rest of World 2%
Stage
Buyout 60%
Venture & Growth Equity 31%
Mezzanine, Infrastructure & Real Assets 9%
Strategy
Primary 50%
Secondary 31%
Direct Co-investment 19%
Phase
Investment 50%
Growth 41%
Mature 9%
Industry
Tech & Software 32%
Consumer 15%
Medical & Biotech 13%
Financial 11%
Industrial & Transport 11%
Business Services & Other 10%
Energy & Cleantech 4%
Media & Telecom 4%
Currency
US dollar 82%
Euro 14%
Sterling 2%
Australian dollar 1%
Other 1%
1 Diversification by stage, phase, strategy, currency, and geography
is based on the estimated NAV of partnership investments within HVPE's fund of
funds and company investments within HVPE's co-investment funds. Industry
diversification is based on the reported value of the underlying company
investments for both fund of funds and co-investment funds.
Recent events
New Commitments since 31 July 2023
Between 1 August 2023 and 25 October 2023, no new commitments were made to
HarbourVest funds.
HVPE Estimated NAV as at 30 September 2023
HVPE releases an estimated NAV on a monthly basis. These reports are available
on the Company's website, generally within 20 calendar days of the month-end.
On 20 October 2023, HVPE published an estimated NAV per share at 30 September
2023 of $49.31 (£40.42), a decrease of $0.81 (-1.6%) from the final 31 July
2023 NAV (US Generally Accepted Accounting Principles ("GAAP")) figure of
$50.12. This was driven by foreign exchange movements and the public market
portion of the portfolio. This latest NAV per share is based on a valuation
breakdown of: 10% as at 30 September 2023 (reflecting 7% public company
holdings and 3% direct co-investments) and 90% actual 30 June 2023. Consistent
with previous estimated NAV reports, valuations are also adjusted for foreign
exchange movements, cash flows, and any known material events to 30 September
2023.
The Investment Pipeline of unfunded commitments decreased from $2.7 billion at
31 July 2023 to $2.5 billion at 30 September 2023, based on the new
commitments, capital funded, and taking foreign exchange movements into
account.
HVPE's cash and equivalents decreased by $73 million from $221 million at 31
July 2023 to $148 million at 30 September 2023. As outlined in the August 2023
and September 2023 factsheets, this is a result of HVPE being a net investor
by $66 million across the two months, as well as the $7 million of share
buybacks conducted during September 2023.
HVPE's look-through exposure to borrowing at the HarbourVest fund level had
decreased by $20 million, from $571 million at 31 July 2023 to $551 million at
30 September 2023. The latest balance sheet ratios can be found in the
factsheet on the HVPE website: www.hvpe.com (http://www.hvpe.com) .
Share Buybacks
As part of the buyback programme announced in May 2023, approximately $7
million of the announced $25 million was completed post period-end in
September 2023.
· At 31 July 2023, HVPE repurchased 685,568 shares for cancellation
at an average price of £20.76 per share for a total consideration of £14.2
million ($18.2 million). This added $0.20 to NAV per share.
· During September 2023, HVPE repurchased 235,000 shares for
cancellation at an average price of £23.84 per share for a total
consideration of £5.6 million ($6.8 million). This added $0.06 to NAV per
share.
· Inclusive of the post period-end buybacks, this means that in
total, HVPE repurchased 920,568 shares for cancellation at an average price of
£21.54 per share for a total consideration of £19.8 million ($25.0 million).
This exercise in full added $0.26 to NAV per share.
Furthermore, as outlined in the Chair's statement on pages 3 to 5, the Board
announced another share buyback programme of $25 million.
Share Price since 31 July 2023
HVPE's share price closed at £21.30 on 20 October 2023, which represents a
5.3% decrease compared with the £22.50 share price recorded on 31 July 2023.
The market capitalisation of the Company as at 20 October 2023 was £1.7
billion and, as of the same date, HVPE was ranked 62nd in the FTSE 250 (21
October 2022: 65th).
Directors' report
Semi-Annual Report and Unaudited Condensed Interim Consolidated
Financial Statements
A description of the important events that have occurred during the six months
ended 31 July 2023 and their impact on the performance of the Company are
given in the Semi-Annual Report and Unaudited Condensed Interim Consolidated
Financial Statements (the "Interim Financial Statements") - together the
"Semi-Annual Report and Accounts"; specifically the Chair's Statement and the
Investment Manager's Report, alongside the Interim Financial Statements, and
are incorporated here by reference.
The principal risks and uncertainties facing the Company can be found on page
13.
There were no material related party transactions which took place in the
first six months of the financial year, other than those disclosed in Note 9
to the Interim Financial Statements. There have been no changes to the related
party transactions described in the 2023 Annual Report and Accounts that could
have a material effect on the financial position or performance of the Company
in the first six months of the current financial year.
This Semi-Annual Report and Accounts has been reviewed by the Company's
auditor in accordance with guidance contained in International Standard on
Review Engagements (UK) 2410 "Review of Interim Financial Information
Performed by the Independent Auditor of the Entity" issued by the Auditing
Practices Board ("ISRE 2410").
Introduction to the Going Concern Statement
Since the inception of HVPE, the Directors have relied upon model scenarios to
manage the Company's liquidity requirements and balance sheet risk more
generally. This modelling allows the Directors to evaluate whether the Company
is a going concern and provides evidence to support the Directors' viability
statement in the Company's annual report and accounts. While the modelling
process has been refined over the years, it has provided a consistent approach
through which the Directors have been able to provide a firm assessment, as
demonstrated through the Global Financial Crisis and COVID-19 pandemic.
Historically the Directors have assessed four scenarios: Optimistic, Base, Low
and Extreme Downside presented by the Investment Manager. As more fully
explained in the Investment Manager's Report above, during the period under
review and subsequent to the period-end, the challenging macroeconomic and
geopolitical environment has resulted in increasing inflation, increasing
interest rates, volatility in public markets and subdued activity in private
markets. The Company's cash flows have therefore been tracking at or below the
Low scenario considered at the start of the year. This has persisted mid-way
through the year and as such the Investment Manager has created two new model
scenarios to replace the original Base and Low Cases. These new scenarios
(Low Base and Adjusted Low Cases) better reflect the actual performance
mid-way through the year and the current market environment, which has
differed significantly from the projections in November 2022 when the original
model scenarios were created. These new scenarios will allow the Directors
to better assess the Balance Sheet and Balance Sheet risks based on the
current market environment.
In considering Going Concern for the required one-year period for these 2023
Semi-Annual Report and Accounts, the Directors therefore primarily focused on
two modelled scenarios: the Adjusted Low and the Extreme Downside. These have
been used to form the basis of the Going Concern statement as provided
below. The credit facility provides an additional source of capital to HVPE
which helps to underpin the existing and future commitments of the Company.
As the balance sheet and new commitments of the Company continue to grow, the
credit facility was increased by $100 million prior to the reporting period to
align with the ongoing growth strategy and risk management practices of the
Company. Along with the model scenarios discussed above, the available
credit facility provides further support in the Board's assessment of going
concern.
Going Concern Statement
In accordance with the AIC Code of Corporate Governance and US GAAP, the Board
has performed a robust assessment of principal risks (refer to page 13 for an
update on the Principal Risks of the Company) along with the assessment of
whether the Company will remain a going concern through the period ending 31
December 2024 which covers the twelve months from the signing of the financial
statements and whether it believes that the principal risks of the Company
will remain as identified on page 13 of this report over the going concern
assessment period.
The Board considered model scenarios assuming varying degrees of impact on the
portfolio over the period ending 31 December 2024. The Board primarily
focused on the Adjusted Low Case and the Extreme Downside Case as noted
above. The Adjusted Low Case was considered a plausible scenario given the
current economic environment, as the Investment Manager included slower
portfolio growth and a slowdown of distributions in the assumptions of the
Adjusted Low Case for the remainder of 2023 and throughout 2024. While the
Adjusted Low Case was the primary focus of the Board in assessing the going
concern of the Company, the Extreme Downside Case was also considered and was
designed to specifically stress the balance sheet with multiple worst case
scenarios all playing out to 31 December 2024; 1) a credit crisis resulting in
all of the fund-level bridging leverage being called at once as the underlying
HarbourVest fund credit facilities could not be renewed ($470.2 million in
unexpected capital called), 2) despite this credit crisis capital calls are
still being received at levels experienced over the last five years (i.e. no
material decline in the level of capital calls as seen during the GFC), 3)
material asset value declines similar to what was experienced during the GFC,
and 4) distribution levels falling to levels lower than what was experienced
during the GFC. While the Extreme Downside Case shows the need for
additional resources of $15 million in 2024, the Directors note that the
projections included in this scenario are extreme and remote given the current
market conditions. In the unlikely event this scenario occurred, the
Directors could take certain actions to raise additional capital such as
selling assets in the secondary market or raising additional capital through
equity or debt issuances. HVPE was able to withstand the regional banking
crisis experienced earlier in 2023 without any accelerated capital calls or
strain on existing resources and therefore the Directors do not believe the
Extreme Downside Case is a likely scenario but factors this into the going
concern assessment. The Extreme Downside Case excludes the additional $25
million of share buybacks announced in this report, as the balance sheet under
this scenario does not support this action. If the $25 million of share
buybacks were completed ahead of the projected extreme events of this scenario
it would result in $40 million of additional resources needed rather than the
$15 million shown above.
With the exception of the Extreme Downside Case described above, the results
of these model scenarios showed that the Company would be able to withstand
the impact of these scenarios occurring to 31 December 2024, through the use
of existing resources (cash and available credit facility) and projected
portfolio distributions. Based on this assessment, the Directors conclude
that the working capital of the Company is sufficient for its current
requirements and the Company will be able to continue in operation at least
through 31 December 2024, which covers the next twelve-month period from the
signing of the Semi-annual Report and Accounts, and substantial doubts do not
exist as to HVPE's ability to continue in operation over this period.
Statement of Directors' Responsibilities in Respect of the Semi-Annual Report
and Accounts
Edmond Warner OBE, Anulika Ajufo, Francesca Barnes, Elizabeth Burne, Carolina
Espinal, and Steven Wilderspin, being the directors of the board of the
Company (the "Directors"), are responsible for preparing the Semi-Annual
Report and Accounts in accordance with applicable law and regulations.
The Directors confirm that to the best of their knowledge:
· the Semi-Annual Report and Accounts have been prepared in
accordance with US GAAP and give a true and fair view of the assets,
liabilities, financial position and profit or loss of the Company and other
undertakings included in the consolidation as a whole; and
· the Chair's Statement, Investment Manager's Report, and Principal
Risks and Uncertainties section include a fair review of the information
required by:
(i) DTR 4.2.7R of the Disclosure Guidance and Transparency Rules, being
an indication of important events that have occurred during the first six
months of the financial year and their impact on the Interim Financial
Statements; and a description of the principal risks and uncertainties for the
remaining six months of the financial year; and
(ii) DTR 4.2.8R of the Disclosure Guidance and Transparency Rules, being
related party transactions that have taken place in the first six months of
the financial year and that have materially affected the financial position or
the performance of the entity during that period; and any changes in the
related party transactions described in the 2023 Annual Report and Accounts
that could do so.
By order of the Board
25 October 2023
Interim Financial Statements
Unaudited Condensed Interim Consolidated Statements of Assets and Liabilities
At 31 July and 31 January 2023
In US Dollars 31 July 2023 31 January 2023
(Unaudited) (Audited)
(in thousands*) (in thousands*)
Assets
Investments (Note 4) 3,908,822 3,616,330
Cash and equivalents 221,396 197,523
Other assets 6,281 25,652
Accounts receivable from HarbourVest Advisers L.P. (Note 9) 158 -
Total assets 4,136,657 3,839,505
Liabilities
Amounts due under the credit facility (Note 6) 200,000 -
Accounts payable and accrued expenses 6,079 1,441
Accounts payable to HarbourVest Advisers L.P. (Note 9) - 138
Total liabilities 206,079 1,579
Net assets $3,930,578 $3,837,926
Net assets consist of
Shares: unlimited shares authorised; 78,419,054 and 79,104,622 shares issued 3,930,578 3,837,926
and outstanding at 31 July and 31 January 2023 respectively, no par value
Net assets $3,930,578 $3,837,926
Net asset value per share $50.12 $48.52
* Except net asset value per share.
The accompanying notes are an integral part of the Unaudited Condensed Interim
Consolidated Financial Statements.
The Unaudited Condensed Interim Consolidated Financial Statements on pages 31
to 45 were approved by the Board on 25 October 2023 and were signed on its
behalf by:
Ed Warner Steven
Wilderspin
Chair
Chair of the Audit and Risk Committee
Unaudited Condensed Interim Consolidated Statements of Operations
For the Six-month Periods Ended 31 July 2023 and 2022
In US Dollars 31 July 2023 31 July 2022
(in thousands) (in thousands)
Realised and unrealised gains (losses) on investments
Net realised gain on investments 52,041 119,089
Net change in unrealised appreciation and depreciation on investments 64,806 (219,727)
Net gain (loss) on investments 116,847 (100,638)
Investment income
Interest and dividends from cash and equivalents 5,125 646
Other income 112 -
Expenses
Interest expense (Note 6) 4,228 -
Non-utilisation fees (Note 6) 3,315 3,436
Financing expenses 1,242 1,279
Investment services (Note 3) 1,227 1,121
Professional fees 536 531
Directors' fees and expenses (Note 9) 230 236
Marketing expenses 203 211
Management fees (Note 3) 59 319
Other expenses 204 393
Total expenses 11,244 7,526
Net investment loss (6,007) (6,880)
Net increase (decrease) in net assets resulting from operations $110,840 $(107,518)
The accompanying notes are an integral part of the Unaudited Condensed Interim
Consolidated Financial Statements.
Unaudited Condensed Interim Consolidated Statements of Changes in Net Assets
For the Six-month Periods Ended 31 July 2023 and 2022
In US Dollars 31 July 2023 31 July 2022
(in thousands) (in thousands)
Increase (decrease) in net assets from operations
Net realised gain on investments 52,041 119,089
Net change in unrealised appreciation and depreciation 64,806 (219,727)
Net investment loss (6,007) (6,880)
Net increase (decrease) in net assets resulting from operations 110,840 (107,518)
Capital share transactions
Share repurchase (18,188) -
Net decrease in net assets from capital share transactions (18,188) -
Total increase (decrease) in net assets 92,652 (107,518)
Net assets at beginning of period 3,837,926 3,921,933
Net assets at end of period $3,930,578 $3,814,415
The accompanying notes are an integral part of the Unaudited Condensed Interim
Consolidated Financial Statements.
Unaudited Condensed Interim Consolidated Statements of Cash Flows
For the Six-month Periods Ended 31 July 2023 and 2022
In US Dollars 31 July 2023 31 July 2022
(in thousands) (in thousands)
Cash flows from operating activities
Net increase (decrease) in net assets resulting from operations 110,840 (107,518)
Adjustments to reconcile net increase (decrease) in net assets resulting from
operations to net cash used in operating activities:
Net realised gain on investments (52,041) (119,089)
Net change in unrealised appreciation and depreciation on investments (64,806) 219,727
Contributions to private equity investments (302,010) (393,578)
Distributions from private equity investments 144,738 388,848
Other 5,340 (82)
Net cash used in operating activities (157,939) (11,692)
Cash flows from financing activities
Proceeds from borrowing on the credit facility 200,000 -
Share repurchase (18,188) -
Net change in financing activities 181,812 -
Net change in cash and equivalents 23,873 (11,692)
Cash and equivalents at beginning of period 197,523 284,023
Cash and equivalents at end of period $221,396 $272,331
Supplemental disclosure of non- cash activities
Distribution-in-kind from HarbourVest Adelaide Feeder L.P. (Note 10) - $117,233
Contribution-in-kind to HarbourVest Infrastructure Income Delaware Parallel - ($117,233)
Partnership L.P. (Note 10)
The accompanying notes are an integral part of the Unaudited Condensed Interim
Consolidated Financial Statements.
Unaudited Condensed Interim Consolidated Schedule of Investments
At 31 July 2023
In US Dollars
Unfunded Amount Distributions Fair Value
Commitment Invested* Received Fair Value as a % of
US Funds (in thousands) (in thousands) (in thousands) (in thousands) Net Assets
HarbourVest Partners V-Partnership Fund L.P. 2,220 46,709 45,924 809 0.0
HarbourVest Partners VI-Direct Fund L.P. 1,313 46,722 40,882 785 0.0
HarbourVest Partners VI-Partnership Fund L.P. 5,175 204,623 237,227 489 0.0
HarbourVest Partners VII-Venture Partnership Fund L.P.(†) 2,319 135,290 204,163 2,206 0.1
HarbourVest Partners VII-Buyout Partnership Fund L.P.(†) 3,850 74,417 103,486 181 0.0
HarbourVest Partners VIII-Cayman Mezzanine and Distressed Debt Fund L.P. 2,000 48,202 61,472 2,446 0.1
HarbourVest Partners VIII-Cayman Buyout Fund L.P. 7,500 245,259 405,898 16,845 0.4
HarbourVest Partners VIII-Cayman Venture Fund L.P. 1,000 49,192 88,651 15,160 0.4
HarbourVest Partners 2007 Cayman Direct Fund L.P. 2,250 97,877 163,802 1,912 0.0
HarbourVest Partners IX-Cayman Buyout Fund L.P. 10,473 60,808 86,476 49,337 1.3
HarbourVest Partners IX-Cayman Credit Opportunities Fund L.P. 1,875 10,674 11,499 6,630 0.2
HarbourVest Partners IX-Cayman Venture Fund L.P. 3,500 66,826 125,397 94,192 2.4
HarbourVest Partners 2013 Cayman Direct Fund L.P. 3,229 97,131 156,278 44,724 1.1
HarbourVest Partners Cayman Cleantech Fund II L.P. 900 19,156 17,349 19,045 0.5
HarbourVest Partners X Buyout Feeder Fund L.P. 34,650 217,378 158,365 233,425 5.9
HarbourVest Partners X Venture Feeder Fund L.P. 6,290 141,764 94,806 275,681 7.0
HarbourVest Partners Mezzanine Income Fund L.P. 8,155 42,067 62,996 19,676 0.5
HarbourVest Partners XI Buyout Feeder Fund L.P. 111,300 238,700 82,013 292,145 7.4
HarbourVest Partners XI Micro Buyout Feeder Fund L.P. 10,855 54,145 18,999 66,516 1.7
HarbourVest Partners XI Venture Feeder Fund L.P. 19,000 171,036 40,285 238,111 6.1
HarbourVest Adelaide Feeder L.P. 6,000 144,000 176,644 1,272 0.0
HarbourVest Partners XII Buyout Feeder Fund L.P. 388,575 106,425 - 124,180 3.2
HarbourVest Partners XII Micro Buyout Feeder Fund L.P. 63,600 16,400 - 18,061 0.5
HarbourVest Partners XII Venture Feeder Fund L.P. 109,013 25,988 - 29,016 0.7
HarbourVest Partners XII Venture AIF SCSp 100,625 14,450 - 17,422 0.4
HarbourVest Infrastructure Income Delaware Parallel Partnership L.P. - 117,233 21,897 118,190 3.0
Total US Funds 905,665 2,492,472 2,404,510 1,688,456 43.0
Unfunded Amount Distributions Fair Value
Commitment Invested* Received Fair Value as a % of
International/Global Funds (in thousands) (in thousands) (in thousands) (in thousands) Net Assets
HarbourVest International Private Equity Partners III-Partnership Fund L.P. 3,450 147,729 148,440 398 0.0
HIPEP V-2007 Cayman European Buyout Companion Fund L.P.(§) 1,565 63,880 84,434 645 0.0
Dover Street VII Cayman L.P. 4,250 83,504 117,950 502 0.0
HIPEP VI-Cayman Partnership Fund L.P.** 5,498 117,845 168,913 68,231 1.7
HIPEP VI-Cayman Asia Pacific Fund L.P. 2,500 47,687 56,919 24,035 0.6
HIPEP VI-Cayman Emerging Markets Fund L.P. - 30,059 14,017 23,621 0.6
Dover Street VIII Cayman L.P. 14,400 165,724 257,445 18,909 0.5
HVPE Charlotte Co-Investment L.P. - 93,894 162,267 869 0.0
HarbourVest Global Annual Private Equity Fund L.P. 10,300 89,701 131,849 80,461 2.0
HIPEP VII Partnership Feeder Fund L.P. 11,563 113,438 109,106 132,471 3.4
HIPEP VII Asia Pacific Feeder Fund L.P. 1,800 28,200 19,709 31,424 0.8
HIPEP VII Emerging Markets Feeder Fund L.P. 2,600 17,400 7,385 22,728 0.6
HIPEP VII Europe Feeder Fund L.P.(††) 7,793 63,467 75,421 69,690 1.8
HarbourVest Canada Parallel Growth Fund L.P.(‡‡) 4,453 19,872 12,881 30,358 0.8
HarbourVest 2015 Global Fund L.P. 7,000 93,017 110,513 80,053 2.0
HarbourVest 2016 Global AIF L.P. 16,000 84,026 83,508 81,565 2.1
HarbourVest Partners Co-Investment IV AIF L.P. 7,000 93,000 85,330 86,938 2.2
Dover Street IX Cayman L.P. 12,000 88,000 91,225 61,637 1.6
HarbourVest Real Assets III Feeder L.P. 3,750 46,250 10,927 48,712 1.2
HarbourVest 2017 Global AIF L.P. 27,500 72,521 54,188 84,090 2.1
HIPEP VIII Partnership AIF L.P. 36,125 133,875 28,926 172,860 4.4
Secondary Overflow Fund III L.P. 24,214 68,876 68,945 68,459 1.7
HarbourVest Asia Pacific VIII AIF Fund L.P. 7,000 43,006 8,000 51,237 1.3
HarbourVest 2018 Global Feeder Fund L.P. 14,000 56,000 19,309 77,794 2.0
HarbourVest Partners Co-Investment V Feeder Fund L.P. 22,500 77,548 19,777 120,418 3.1
HarbourVest Real Assets IV Feeder L.P. 22,000 28,000 7,768 32,426 0.8
HarbourVest 2019 Global Feeder Fund L.P. 31,500 68,507 14,404 94,179 2.4
HarbourVest Credit Opportunities 2,500 47,500 7,852 48,561 1.2
Fund II L.P.
Dover Street X Feeder Fund L.P. 52,125 97,893 36,558 119,320 3.0
Secondary Overflow Fund IV L.P. 53,260 76,147 24,776 86,128 2.2
HIPEP IX Feeder Fund L.P. 354,050 130,958 9,127 157,577 4.0
HarbourVest 2020 Global Feeder Fund L.P. 13,250 36,751 4,147 41,098 1.0
HarbourVest Partners Co-Investment VI Feeder Fund L.P. 62,500 62,506 - 65,618 1.7
HarbourVest Asia Pacific 5 Feeder Fund L.P. 291,000 9,000 - 5,189 0.1
HarbourVest 2021 Global Feeder Fund L.P. 97,222 72,830 2,790 79,916 2.0
HarbourVest 2022 Global Feeder Fund L.P. 85,000 15,000 - 20,001 0.5
Dover Street XI Feeder Fund L.P. 235,000 15,000 - 32,205 0.8
HarbourVest Credit Opportunities III Feeder Fund L.P. 75,000 - - 44 0.0
HIPEP X Fund 125,000 - - - 0.0
Total International/Global Funds 1,746,668 2,598,611 2,054,806 2,220,366 56.4
Total Investments $2,652,333 $5,091,083 $4,459,316 $3,908,822 99.4%
* Includes purchase of limited partner interests for shares and cash
at the time of HVPE's IPO.
† Includes ownership interests in HarbourVest Partners VII-Cayman
Partnership entities.
§ Fund denominated in euros. Commitment amount is €47,450,000.
** Fund denominated in euros. Commitment amount is €100,000,000.
†† Fund denominated in euros. Commitment amount is €63,000,000.
‡‡ Fund denominated in Canadian dollars. Commitment amount is
C$32,000,000.
As of 31 July 2023, the cost basis of partnership investments is
$2,532,458,000.
Totals and subtotals may not recalculate due to rounding.
The accompanying notes are an integral part of the Unaudited Condensed Interim
Consolidated Financial Statements.
At 31 january 2023 (audited)
In US Dollars
Unfunded Amount Distributions Fair Value
Commitment Invested* Received Fair Value as a % of
US Funds (in thousands) (in thousands) (in thousands) (in thousands) Net Assets
HarbourVest Partners V-Partnership Fund L.P. 2,220 46,709 45,924 816 0.0
HarbourVest Partners VI-Direct Fund L.P. 1,313 46,722 40,882 260 0.0
HarbourVest Partners VI-Partnership Fund L.P. 5,175 204,623 237,227 503 0.0
HarbourVest Partners VII-Venture Partnership Fund L.P.(†) 2,319 135,290 204,163 2,132 0.1
HarbourVest Partners VII-Buyout Partnership Fund L.P.(†) 3,850 74,417 103,486 187 0.0
HarbourVest Partners VIII-Cayman Mezzanine and Distressed Debt Fund L.P. 2,466 0.1
2,000 48,202 61,472
HarbourVest Partners VIII-Cayman Buyout Fund L.P. 7,500 245,259 404,137 21,860 0.6
HarbourVest Partners VIII-Cayman Venture Fund L.P. 1,000 49,192 88,651 15,883 0.4
HarbourVest Partners 2007 Cayman Direct Fund L.P. 2,250 97,877 160,808 4,946 0.1
HarbourVest Partners IX-Cayman Buyout Fund L.P. 10,473 60,808 84,303 49,417 1.3
HarbourVest Partners IX-Cayman Credit Opportunities Fund L.P. 1,875 10,674 11,337 6,807 0.2
HarbourVest Partners IX-Cayman Venture Fund L.P. 3,500 66,826 124,117 94,932 2.5
HarbourVest Partners 2013 Cayman Direct Fund L.P. 3,229 97,131 148,459 51,604 1.3
HarbourVest Partners Cayman Cleantech Fund II L.P. 900 19,156 16,143 18,984 0.5
HarbourVest Partners X Buyout Feeder Fund L.P. 42,840 209,188 154,487 219,696 5.7
HarbourVest Partners X Venture Feeder Fund L.P. 6,290 141,764 91,859 278,980 7.3
HarbourVest Partners Mezzanine Income Fund L.P. 8,155 42,067 62,671 18,132 0.5
HarbourVest Partners XI Buyout Feeder Fund L.P. 129,500 220,500 70,642 277,494 7.2
HarbourVest Partners XI Micro Buyout Feeder Fund L.P. 19,955 45,045 18,490 55,692 1.5
HarbourVest Partners XI Venture Feeder Fund L.P. 33,250 156,786 38,522 221,358 5.8
HarbourVest Adelaide Feeder L.P. 6,000 144,000 176,644 1,320 0.0
HarbourVest Partners XII Buyout Feeder Fund L.P. 457,875 37,125 - 42,754 1.1
HarbourVest Partners XII Micro Buyout Feeder Fund L.P. 78,400 1,600 - 1,102 0.0
HarbourVest Partners XII Venture Feeder Fund L.P. 122,175 12,825 - 13,122 0.3
HarbourVest Partners XII Venture AIF SCSp 13,463 0.4
102,350 12,725 -
Harbourvest Infrastructure Income Delaware Parallel Partnership 119,638 3.1
- 117,233 18,373
Total US Funds 1,054,393 2,343,743 2,362,798 1,533,549 40.0
Unfunded Amount Distributions Fair Value
Commitment Invested* Received Fair Value as a % of
International/Global Funds (in thousands) (in thousands) (in thousands) (in thousands) Net Assets
HarbourVest International Private Equity Partners III-Partnership Fund L.P. 3,450 147,729 148,440 395 0.0
HIPEP V-2007 Cayman European Buyout Companion Fund L.P.(§) 1,546 63,880 84,434 665 0.0
Dover Street VII Cayman L.P. 4,250 83,504 117,756 775 0.0
HIPEP VI-Cayman Partnership Fund L.P.** 5,432 117,845 163,073 73,196 1.9
HIPEP VI-Cayman Asia Pacific Fund L.P. 2,500 47,687 55,840 26,154 0.7
HIPEP VI-Cayman Emerging Markets Fund L.P. - 30,059 12,151 24,542 0.6
Dover Street VIII Cayman L.P. 14,400 165,724 255,442 21,677 0.6
HVPE Charlotte Co-Investment L.P. - 93,894 161,228 1,979 0.1
HarbourVest Global Annual Private Equity Fund L.P. 11,300 88,701 128,959 79,433 2.1
HIPEP VII Partnership Feeder Fund L.P. 14,688 110,313 94,516 137,579 3.6
HIPEP VII Asia Pacific Feeder Fund L.P. 1,950 28,050 18,269 34,051 0.9
HIPEP VII Emerging Markets Feeder Fund L.P. 2,600 17,400 7,385 21,462 0.6
HIPEP VII Europe Feeder Fund L.P.(††) 9,411 61,749 62,637 75,215 2.0
HarbourVest Canada Parallel Growth Fund L.P.(‡‡) 5,056 19,224 12,427 30,321 0.8
HarbourVest 2015 Global Fund L.P. 8,500 91,517 106,979 81,507 2.1
HarbourVest 2016 Global AIF L.P. 23,000 77,026 76,508 77,869 2.0
HarbourVest Partners Co-Investment IV AIF L.P. 7,000 93,000 85,330 86,145 2.2
Dover Street IX Cayman L.P. 13,000 87,000 88,613 63,361 1.7
HarbourVest Real Assets III Feeder L.P. 3,750 46,250 9,121 52,457 1.4
HarbourVest 2017 Global AIF L.P. 27,500 72,521 53,510 81,961 2.1
HIPEP VIII Partnership AIF L.P. 49,725 120,275 28,926 154,277 4.0
Secondary Overflow Fund III L.P. 24,214 68,876 66,304 68,707 1.8
HarbourVest Asia Pacific VIII AIF Fund L.P. 8,250 41,756 8,000 50,108 1.3
HarbourVest 2018 Global Feeder Fund L.P. 15,400 54,600 18,850 75,203 2.0
HarbourVest Partners Co-Investment V Feeder Fund L.P. 22,500 77,548 15,940 123,382 3.2
HarbourVest Real Assets IV Feeder L.P. 22,000 28,000 4,167 35,278 0.9
HarbourVest 2019 Global Feeder Fund L.P. 36,000 64,007 13,621 87,489 2.3
HarbourVest Credit Opportunities 2,500 47,500 2,710 50,745 1.3
Fund II L.P.
Dover Street X Feeder Fund L.P. 55,125 94,893 32,646 115,696 3.0
Secondary Overflow Fund IV L.P. 57,573 71,833 24,776 78,578 2.1
HIPEP IX Feeder Fund L.P. 388,000 97,008 7,095 120,489 3.1
HarbourVest 2020 Global Feeder Fund L.P. 16,000 34,001 3,513 39,054 1.0
HarbourVest Partners Co-Investment VI Feeder Fund L.P. 93,750 31,256 - 31,562 0.8
HarbourVest Asia Pacific 5 Feeder Fund L.P. 291,000 9,000 - 7,756 0.2
HarbourVest 2021 Global Feeder Fund L.P. 111,350 58,701 987 63,411 1.7
HarbourVest 2022 Global Feeder Fund L.P. 97,000 3,000 - 4,323 0.1
Dover Street XI Feeder Fund L.P. 225,000 - - 5,979 0.2
HarbourVest Credit Opportunities III Feeder Fund L.P.
75,000 - - - -
Total International/Global Funds 1,749,720 2,445,329 1,970,152 2,082,782 54.3
Total Investments $2,804,113 $4,789,072 $4,332,950 $3,616,330 94.3%
* Includes purchase of limited partner interests for shares and cash
at the time of HVPE's IPO.
† Includes ownership interests in HarbourVest Partners VII-Cayman
Partnership entities.
§ Fund denominated in euros. Commitment amount is €47,450,000.
** Fund denominated in euros. Commitment amount is €100,000,000.
†† Fund denominated in euros. Commitment amount is €63,000,000.
‡‡ Fund denominated in Canadian dollars. Commitment amount is
C$32,000,000.
As of 31 January 2023, the cost basis of partnership investments is
$2,304,772,000.
Totals and subtotals may not recalculate due to rounding.
Notes to Unaudited Condensed Interim Consolidated Financial Statements
Note 1 Company Organisation and Investment Objective
HarbourVest Global Private Equity Limited (the "Company" or "HVPE") is a
closed-ended investment company registered with the Registrar of Companies in
Guernsey under The Companies (Guernsey) Law, 2008. The Company's registered
office is BNP Paribas House, St Julian's Avenue, St Peter Port, Guernsey GY1
1WA.
The Company was incorporated and registered in Guernsey on 18 October 2007.
HVPE is designed to offer shareholders long-term capital appreciation by
investing in a diversified portfolio of private equity investments. The
Company invests in private equity through private equity funds and may
make co-investments or other opportunistic investments. The Company is
managed by HarbourVest Advisers L.P. (the "Investment Manager"), an affiliate
of HarbourVest Partners, LLC ("HarbourVest"), a private equity fund-of-funds
manager. The Company intends to invest in and alongside existing and
newly-formed HarbourVest funds. HarbourVest is a global private equity fund of
funds manager and typically invests capital in primary partnerships, secondary
investments, and direct investments across vintage years, geographies,
industries, and strategies.
Operations of the Company commenced on 6 December 2007, following the initial
global offering of the Class A Ordinary Shares.
Share Capital
At 31 July 2023, the Company's 78,419,054 shares continued to be listed on the
London Stock Exchange under the symbol "HVPE". The shares are entitled to the
income and increases and decreases in the net asset value ("NAV") of the
Company, and to any dividends declared and paid, and have full voting rights.
Dividends may be declared by the Board of Directors and paid from available
assets subject to the Directors being satisfied that the Company will,
immediately after payment of the dividend, satisfy the statutory solvency test
prescribed by The Companies (Guernsey) Law, 2008. The company repurchased
685,568 shares during the period ended 31 July 2023.
Dividends would be paid to shareholders pro rata to their shareholdings.
The shareholders must approve any amendment to the Memorandum and Articles of
Incorporation. The approval of 75% of the shares is required in respect of any
changes that are administrative in nature, any material change from the
investment strategy and/or investment objective of the Company, or any
material change to the terms of the Investment Management Agreement.
There is no minimum statutory capital requirement under Guernsey law.
Investment Manager, Company Secretary, and Administrator
The Directors have delegated certain day-to-day operations of the Company to
the Investment Manager and the Company Secretary and Administrator, under
advice of the Directors, pursuant to service agreements with those parties,
within the context of the strategy set by the Board. The Investment Manager is
responsible for, among other things, selecting, acquiring, and disposing of
the Company's investments, carrying out financing, cash management, and risk
management activities, providing investment advisory services, including with
respect to HVPE's investment policies and procedures, and arranging for
personnel and support staff of the Investment Manager to assist in the
administrative and executive functions of the Company.
Directors
The Directors are responsible for the determination of the investment policy
of the Company on the advice of the Investment Manager and have overall
responsibility for the Company's activities. This includes the periodic review
of the Investment Manager's compliance with the Company's investment policies
and procedures, and the approval of certain investments. A majority of
Directors must be independent Directors and not affiliated with HarbourVest
or any affiliate of HarbourVest.
Note 2 Summary of Significant Accounting Policies
Accounting policies have been applied consistently as presented in the latest
audited accounts which have been prepared under US GAAP.
Note 3 Material Agreements and Related Fees
Administrative Agreement
The Company has retained BNP Paribas S.A., Guernsey Branch ("BNP") as Company
Secretary and Administrator. Fees for these services are paid as invoiced by
BNP and include an administration fee of £50,000 per annum, a secretarial fee
of £60,000 per annum, a compliance services fee of £15,000 per annum, ad-hoc
service fees, and reimbursable expenses. During the periods ended 31 July 2023
and 2022, fees of $79,000 and $78,000, respectively, were incurred to BNP and
are included as other expenses in the Unaudited Condensed Interim Consolidated
Statements of Operations.
Registrar
The Company has retained Link Asset Services as share registrar. Fees for this
service include a base fee of £15,500, plus other miscellaneous expenses.
During the periods ended 31 July 2023 and 2022, registrar fees of $10,000 and
$10,000, respectively, were incurred and are included as other expenses in the
Unaudited Condensed Interim Consolidated Statements of Operations.
Independent Auditor's Fees
For the periods ended 31 July 2023 and 2022, auditor fees of $245,000 and
$214,000 were accrued, respectively, and are included in professional fees in
the Unaudited Condensed Interim Consolidated Statements of Operations. The 31
July 2023 and 2022 figures include $140,000 and $116,000, respectively, which
represents approximately half of each period's respective annual audit fee.
The 31 July 2023 and 2022 figures also include $6,000 and $4,000,
respectively, related to the prior financial year's audit fee. In addition,
the 31 July 2023 and 2022 figures include fees of $99,000 and $94,000,
respectively, for audit-related services due to the Auditor, Ernst & Young
LLP, conducting a review of the Interim Financial Statements for each period
end. There were no other non-audit fees paid to the Auditor by the Company
during the periods ended 31 July 2023 and 2022.
Investment Management Agreement
The Company has retained HarbourVest Advisers L.P. as the Investment Manager.
The Investment Manager is reimbursed for costs and expenses incurred on behalf
of the Company in connection with the management and operation of the Company.
During the periods ended 31 July 2023 and 2022, reimbursements for services
provided by the Investment Manager were $1,227,000 and $1,121,000,
respectively. As of 1 February 2022, the Investment Manager is reimbursed on a
fixed fee basis rather than an hourly basis. The Investment Manager does not
directly charge HVPE management fees or performance fees other than with
respect to parallel investments. However, as an investor in the HarbourVest
funds, HVPE is charged the same management fees and is subject to the same
performance allocations as other investors in such HarbourVest funds.
During the periods ended 31 July 2023 and 2022, HVPE had one parallel
investment: HarbourVest Structured Solutions II, L.P. (via HVPE Charlotte
Co-Investment L.P.). Management fees paid for the parallel investment made by
the Company were consistent with the fees charged by the funds alongside
which the parallel investment was made during the periods ended 31 July 2023
and 2022.
Management fees included in the Unaudited Condensed Interim Consolidated
Statements of Operations are shown in the table below:
2023 2022
(in thousands) (in thousands)
HVPE Charlotte Co-Investment L.P. $59 $319
For the periods ended 31 July 2023 and 2022, management fees on the HVPE
Charlotte Co-Investment L.P. investment were calculated based on a weighted
average effective annual rate of 0.07% and 0.37% respectively, on capital
originally committed, net of management fee offsets to the parallel
investment.
Note 4 Investments
In accordance with the authoritative guidance on fair value measurements and
disclosures under generally accepted accounting principles in the US, the
Company discloses the fair value of its investments in a hierarchy that
prioritises the inputs to valuation techniques used to measure the fair value.
The hierarchy gives the highest priority to unadjusted quoted prices in active
markets for identical assets or liabilities (Level 1 measurements) and the
lowest priority to unobservable inputs (Level 3 measurements). The guidance
establishes three levels of the fair value hierarchy as follows:
Level 1 - Inputs that reflect unadjusted quoted prices in active markets for
identical assets or liabilities that the Company has the ability to access at
the measurement date;
Level 2 - Inputs other than quoted prices that are observable for the asset or
liability either directly or indirectly, including inputs in markets that are
not considered to be active; and
Level 3 - Inputs that are unobservable.
Level 3 investments include limited partnership interests in HarbourVest
funds which report under US generally accepted accounting principles. Inputs
used to determine fair value are primarily based on the most recently reported
NAV provided by the underlying investment manager as a practical expedient
under ASC Topic 820. The fair value is then adjusted for known investment
operating expenses and subsequent transactions, including investments,
realisations, changes in foreign currency exchange rates, and changes in value
of private and public securities.
Income derived from investments in HarbourVest funds is recorded using the
equity pick-up method. Under the equity pick-up-method of accounting, the
Company's proportionate share of the net income (loss) and net realised gains
(losses), as reported by the HarbourVest funds, is reflected in the
Consolidated Statements of Operations as net realised gain (loss) on
investments. The Company's proportionate share of the aggregate increase or
decrease in unrealised appreciation or depreciation, as reported by
the HarbourVest funds, is reflected in the Consolidated Statements of
Operations as net change in unrealised appreciation on investments.
Because of the inherent uncertainty of these valuations, the estimated fair
value may differ significantly from the value that would have been used had a
ready market for this security existed, and the difference could be material.
During the periods ended 31 July 2023 and 2022, the Company made contributions
of $302,010,000 and $393,578,000, respectively, to Level 3 investments and
received distributions of $144,738,000 and $388,848,000, respectively, from
Level 3 investments. Please refer to Note 10 for further detail on the
non-cash activity during the year. As of 31 July 2023, $3,908,822,000 of the
Company's investments are classified as Level 3. As of 31 January 2023,
$3,616,330,000 of the Company's investments were classified as Level 3.
Note 5 Commitments
As of 31 July 2023, the Company had unfunded investment commitments to other
limited partnerships of $2,652,333,000 which are payable upon notice by the
partnerships to which the commitments have been made. As of 31 January 2023,
the Company had unfunded investment commitments to other limited partnerships
of $2,804,113,000.
The Investment Manager is not entitled to any direct remuneration (save
expenses incurred in the performance of its duties) from the Company, instead
deriving its fees from the management fees and carried interest payable by the
Company on its investments in underlying HarbourVest Funds. The Investment
Management Agreement (the "IMA"), which was amended and restated on 30 July
2019, and again on 31 January 2023, may be terminated by either party by
giving 12 months' notice. In the event of termination within ten years and
three months of the date of the listing on the Main Market on 9 September
2015, the Company would be required to pay a contribution, which would have
been $1.9 million at 31 July 2023 and $2.7 million at 31 July 2022, as
reimbursement of the Investment Manager's remaining unamortised IPO costs. In
addition, the Company would be required to pay a fee equal to the aggregate of
the management fees for the underlying investments payable over the course of
the 12-month period preceding the effective date of such termination to the
Investment Manager.
Note 6 Debt Facility
As of 31 July 2023 and 2022, the Company had an agreement with Mitsubishi UFJ
Trust and Banking Corporation, New York Branch ("MUFG"), Credit Suisse AG,
London Branch ("Credit Suisse") and The Guardians of New Zealand
Superannuation as manager and administrator of the New Zealand Superannuation
Fund ("New Zealand Super") for the provision of a multi-currency revolving
credit facility (the "Facility") with a termination date no earlier than
January 2026, subject to usual covenants. The MUFG commitment was $300
million. On 20 December 2021, the Credit Suisse commitment was increased from
$300 million to $400 million. On 15 August 2022 the commitment was further
increased by $100 million through New Zealand Super as lender.
Amounts borrowed against the Facility accrue interest at an aggregate rate of
Term SOFR/SONIA/EURIBOR, a margin, and, under certain circumstances, a
mandatory minimum cost. The Facility is secured by the private equity
investments and cash and equivalents of the Company, as defined in the
agreement, and is subject to certain loan-to-value ratios (which factor in
borrowing on the Facility and fund-level borrowing) and portfolio diversity
tests applied to the Investment Portfolio of the Company. At 31 July 2023 and
31 January 2023, there was $200,000,000 and no debt outstanding against the
Facility, respectively. For the periods ended 31 July 2023 and 2022, interest
of $4,228,000 and $0, respectively, was incurred. Included in other assets at
31 July 2023 and 31 January 2023 are deferred financing costs of $5,853,000
and $6,950,000, respectively, related to refinancing the Facility. The
deferred financing costs are amortised on the terms of the Facility. The
Company is required to pay a non-utilisation fee of 100 basis points per annum
for the Credit Suisse commitment and 90 basis points per annum for the MUFG
commitment. For the periods ended 31 July 2023 and 2022, $3,315,000 and
$3,436,000, respectively, in non-utilisation fees have been incurred.
Note 7 Financial Highlights
For the Six-month Periods Ended 31 July 2023 and 2022
In US Dollars 2023 (Unaudited) 2022 (Unaudited)
Shares
Per share operating performance:
Net asset value, beginning of period $48.52 $49.11
Net realised and unrealised gains (losses) 1.48 (1.26)
Net investment losses (0.08) (0.09)
Total from investment operations 1.40 (1.35)
Net increase from repurchase of Class A Shares 0.20 -
Net asset value, end of period $50.12 $47.76
Market value, end of period $29.20* $29.00*
Total return at net asset value 3.3% (2.7)%
Total return at market value 7.7% (22.3)%
Ratios to average net assets
Expenses(†) 0.29% 0.19%
Net investment loss (0.15)% (0.18)%
* Represents the US dollar-denominated share price.
† Does not include operating expenses of underlying investments.
Note 8 Publication and Calculation of Net Asset Value
The NAV of the Company is equal to the value of its total assets less its
total liabilities. The NAV per share is calculated by dividing the NAV by the
number of shares in issue on that day. The Company publishes the NAV per share
of the shares as calculated, monthly in arrears, at each month end, generally
within 20 days.
Note 9 Related Party Transactions
Other amounts receivable from HarbourVest Advisers L.P. of $158,000
represent a reimbursement due to the Company for an overpayment of Company
expenses incurred in the ordinary course of business, which have been paid for
and are reimbursable from the Investment Manager at 31 July 2023. Other
amounts payable to HarbourVest Advisers L.P. of $138,000 represent expenses of
the Company incurred in the ordinary course of business, which have been paid
by and are reimbursable to the Investment Manager at 31 January 2023.
Other income relates to income received from a revenue sharing agreement
entered into with the HarbourVest Infrastructure Income Delaware Parallel
Partnership ("HIIP") investment. Through such agreement, the Company is
entitled to 10% of the management fee revenue received by HarbourVest from
HIIP, provided that HarbourVest remains as HIIP's exclusive investment
manager.
Directors' fees and expenses, primarily compensation, of $230,000 and $236,000
were incurred during the periods ended 31 July 2023 and 2022, respectively.
Note 10 Investment Transaction
On 1 July 2022, HarbourVest Infrastructure Income Delaware Parallel
Partnership L.P. and its related entities ("HIIP") exercised their contractual
right to purchase the portfolio assets of HarbourVest Adelaide L.P.
("Adelaide") in accordance with the Adelaide limited partnership agreement. As
consideration for the portfolio assets, partners of Adelaide and its feeder
funds could elect between the continuation option (which would result in them
receiving ordinary HIIP units) and the liquidity option (which would result in
them receiving partial cash consideration with the remainder of the
consideration in the form of HIIP liquidity units). The Company elected to
participate 50% in the continuation option and 50% in the liquidity option. As
such, as of 1 July 2022 the Company received a cash distribution of
$52,903,685, a distribution in kind of $32,164,540 worth of HIIP liquidity
units, and a distribution in kind of $85,068,225 worth of ordinary HIIP units.
Note 11 Indemnifications
General Indemnifications
In the normal course of business, the Company may enter into contracts that
contain a variety of representations and warranties and which provide for
general indemnifications. The Company's maximum exposure under these
arrangements is unknown, as this would involve future claims that may be made
against the Company that have not yet occurred. Based on the prior experience
of the Investment Manager, the Company expects the risk of loss under these
indemnifications to be remote.
Investment Manager Indemnifications
Consistent with standard business practices in the normal course of business,
the Company has provided general indemnifications to the Investment Manager,
any affiliate of the Investment Manager and any person acting on
behalf of the Investment Manager or such affiliate when they act in good
faith, in the best interest of the Company. The Company is unable to develop
an estimate of the maximum potential amount of future payments that could
potentially result from any hypothetical future claim but expects the risk of
having to make any payments under these general business indemnifications to
be remote.
Directors' and Officers' Indemnifications
The Company's Articles of Incorporation provide that the Directors, managers
or other officers of the Company shall be fully indemnified by the Company
from and against all actions, expenses, and liabilities which they may incur
by reason of any contract entered into or any act in or about the execution of
their offices, except such (if any) as they shall incur by or through their
own negligence, default, breach of duty, or breach of trust, respectively.
Note 12 Subsequent Events
In the preparation of the Interim Financial Statements, the Company has
evaluated the effects, if any, of events occurring after 31 July 2023 to 25
October 2023, the date that the Financial Statements were signed.
The Company made the following purchases of its ordinary shares for
cancellation:
Date Number of Shares Amount Purchased (£)
20 September 2023 9,062 213,831
21 September 2023 40,938 974,845
22 September 2023 75,000 1,788,384
25 September 2023 50,000 1,192,500
26 September 2023 25,000 596,250
27 September 2023 25,000 596,250
28 September 2023 10,000 234,800
There were no other events or material transactions subsequent to 31 July 2023
that required recognition or disclosure in the Unaudited Condensed Interim
Consolidated Financial Statements.
Disclosures
Investments
The companies represented within this report are provided for illustrative
purposes only, as example portfolio holdings. There are over 14,000 individual
companies in the HVPE portfolio, with no one company comprising more than 2.2%
of the entire portfolio.
The deal summaries, General Partners (managers), and/or companies shown within
the report are intended for illustrative purposes only. While they may
represent an actual investment or relationship in the HVPE portfolio, there is
no guarantee they will remain in the portfolio in the future.
Past performance is no guarantee of future returns.
Forward-looking Statements
This report contains certain forward-looking statements. Forward-looking
statements relate to expectations, beliefs, projections, future plans and
strategies, anticipated events or trends, and similar expressions concerning
matters that are not historical facts. In some cases, forward-looking
statements can be identified by terms such as "anticipate", "believe",
"could", "estimate", "expect", "intend", "may", "plan", "potential", "should",
"will", and "would", or the negative of those terms, or other comparable
terminology. The forward-looking statements are based on the Investment
Manager's and/or the Directors' beliefs, assumptions, and expectations of
future performance and market developments, taking into account all
information currently available. These beliefs, assumptions, and expectations
can change as a result of many possible events or factors, not all of which
are known or are within the Investment Manager's and/or the Directors'
control. If a change occurs, the Company's business, financial condition,
liquidity, and results of operations may vary materially from those expressed
in forward-looking statements.
By their nature, forward-looking statements involve known and unknown risks
and uncertainties because they relate to events, and depend on circumstances,
that may or may not occur in the future. Forward-looking statements are not
guarantees of future performance. Any forward-looking statements are only made
as at the date of this document, and the Investment Manager and/or the
Directors neither intends nor assumes any obligation to update forward-looking
statements set forth in this document whether as a result of new information,
future events, or otherwise, except as required by law or other applicable
regulation.
In light of these risks, uncertainties, and assumptions, the events described
by any such forward-looking statements might not occur. The Investment Manager
and/or the Directors qualifies any and all of its forward-looking statements
by these cautionary factors.
Please keep this cautionary note in mind while reading this report.
Some of the factors that could cause actual results to vary from those
expressed in forward-looking statements include, but are not limited to:
· the factors described in this report;
· the rate at which HVPE deploys its capital in investments and
achieves expected rates of return;
· HarbourVest's ability to execute its investment strategy,
including through the identification of a sufficient number of appropriate
investments;
· the ability of third-party managers of funds in which the
HarbourVest funds are invested and of funds in which the Company may invest
through parallel investments to execute their own strategies and achieve
intended returns;
· the continuation of the Investment Manager as manager of the
Company's investments, the continued affiliation with HarbourVest of its key
investment professionals, and the continued willingness of HarbourVest to
sponsor the formation of and capital raising by, and to manage, new private
equity funds;
· HVPE's financial condition and liquidity, including its ability
to access or obtain new sources of financing at attractive rates in order to
fund short-term liquidity needs in accordance with the investment strategy and
commitment policy;
· changes in the values of, or returns on, investments that the
Company makes;
· changes in financial markets, interest rates, or industry,
general economic, or political conditions; and
· the general volatility of the capital markets and the market
price of HVPE's shares.
Publication and Calculation of Net Asset Value
The NAV of the Company is equal to the value of its total assets less its
total liabilities. The NAV per share is calculated by dividing the NAV of the
Company by the number of shares in issue. The Company intends to publish the
estimated NAV per share as calculated, monthly in arrears, as at each
month-end, generally within 20 days.
Regulatory Information
HVPE is required to comply with the Listing Rules, Disclosure Guidance and
Transparency Rules of the Financial Conduct Authority in the United Kingdom
(the "LDGT Rules"). It is also authorised by the Guernsey Financial Services
Commission as an authorised closed-end investment scheme under the Protection
of Investors (Bailiwick of Guernsey) Law, 2020, as amended (the "POI Law").
HVPE is subject to certain ongoing requirements under the LDGT Rules and the
POI Law and certain rules promulgated thereunder relating to the disclosure of
certain information to investors, including the publication of annual and
half-yearly financial reports.
Valuation Policy
Valuations Represent Fair Value Under US GAAP
HVPE's 31 July 2023 NAV is based on the 30 June 2023 NAV of each HarbourVest
fund and Conversus, adjusted for changes in the value of public securities,
foreign currency, known material events, cash flows, and operating expenses
during July 2023. The valuation of each HarbourVest fund is presented on a
fair value basis in accordance with US generally accepted accounting
principles ("US GAAP"). See Note 4 in the Notes to the Financial Statements on
pages 42 to 43.
The Investment Manager typically obtains financial information from 90% or
more of the underlying investments for each of HVPE's HarbourVest funds to
calculate the NAV. For each fund, the accounting team reconciles investments,
distributions, and unrealised/realised gains and losses to the Financial
Statements. The team also reviews underlying partnership valuation policies.
Management of Foreign Currency Exposure
The Investment Portfolio includes three euro-denominated HarbourVest funds and
a Canadian dollar-denominated fund.
· 14% of underlying partnership holdings are denominated in euros.
The euro-denominated Investment Pipeline is €13.5 million.
· 2% of underlying partnership holdings are denominated in
sterling. There is no sterling-denominated Investment Pipeline.
· 1% of underlying partnership holdings are denominated in
Australian dollars. There is no Australian dollar-denominated Investment
Pipeline.
· 0.4% of underlying partnership holdings are denominated in
Canadian dollars. The Canadian dollar-denominated Investment Pipeline is C$5.9
million.
HVPE has exposure to foreign currency movement through foreign
currency-denominated assets within the Investment Portfolio and through its
Investment Pipeline of unfunded commitments, which are long term in nature.
The Company's most significant currency exposure is to euros. The Company does
not actively use derivatives or other products to hedge the currency exposure.
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