TIDMHVPE
RNS Number : 3250R
HarbourVest Global Priv. Equity Ltd
26 October 2023
26 October 2023
RESULTS FOR THE SIX MONTHSED 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: $48.52).
-- Well-diversified portfolio delivering consistent long-term
returns, with growth spread broadly across stage and strategy.
-- Particular strength in buyout, secondary and European segments over the period.
-- NAV growth supplemented by profitable exits, with weighted
average uplift on carrying value of 32%(1) .
Ongoing long-term outperformance of public markets
-- Outperformance of FTSE All World Total Return (FTSE AW TR)
Index of 5.2% annualised over the past 10 years.
-- Absolute NAV per share return of 286% over 10 years to 31
July 2023 vs FTSE AW TR Index of 142% over the same period.
PERFORMANCE AS AT 31 JULY 2023
Since inception
1y 3y 5y 10y (2007)
========================== ==== ==== ===== ===== ================
NAV per share ($)(2) 5% 78% 119% 286% 401%
========================== ==== ==== ===== ===== ================
Share price total return
($) 1% 47% 71% 199% 187%
Share price total return
(GBP) -7% 47% 73% 249% 347%
========================== ==== ==== ===== ===== ================
FTSE AW total return
($) 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 (GBP20 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 .
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/ . 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
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
.
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 at 11:00AM BST today.
-S -
LEI: 213800NBWV6WWV8TOL46
Enquiries:
Shareholders
Richard Hickman Tel: +44 (0)20 7399 rhickman@harbourvest.com
9847
Media
HarbourVest Partners
Lily Cabianca Tel: +44 (0)20 7151 lcabianca@harbourvest.com
4261
MHP
Charlie Barker / Tel: +44 (0)20 3128 HVPE@mhpgroup.com
Robert Collett-Creedy 8540
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
(c) 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 GBP20.76 per share
for a total consideration of GBP14 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 GBP21.54 per share for a total
consideration of GBP20 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 markets(1). 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 estimates (2) , leading to the S&P 500
Information Technology Index outperforming relative to the wider
S&P 500 Index by the largest margin since 2009 (3) .
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 (GBP22.10 at 31 January 2023 and GBP22.50 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 (GBP19.30 on
22 March 2023) to +5.7% (GBP23.35 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 industry
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 Vintage Description Called amount
Name Year
------------------ --------- ------------------------------ --------------
US-focused buyout fund of
Fund XII Buyout 2021 funds $69m
------------------ --------- ------------------------------ --------------
International multi-strategy
HIPEP IX 2020 fund of funds $34m
------------------ --------- ------------------------------ --------------
Global direct co-investment
Co-Investment VI 2021 fund $31m
------------------ --------- ------------------------------ --------------
US-focused buyout fund of
Fund XI Buyout 2018 funds $18m
------------------ --------- ------------------------------ --------------
Dover XI 2022 Global secondary fund $15m
------------------ --------- ------------------------------ --------------
Top Five HarbourVest Fund Distributions
HarbourVest Fund Vintage Description Distributed
Name Year amount
---------------------------- --------- ------------------------------ ------------
HarbourVest Infrastructure Global infrastructure and
Income Partnership 2022 real assets fund $22m
---------------------------- --------- ------------------------------ ------------
HIPEP VII Partnership International multi-strategy
Fund 2014 fund of funds $15m
---------------------------- --------- ------------------------------ ------------
HIPEP VII Europe International multi-strategy
Fund 2014 fund of funds $13m
---------------------------- --------- ------------------------------ ------------
US-focused buyout fund of
Fund XI Buyout 2018 funds $11m
---------------------------- --------- ------------------------------ ------------
Global direct co-investment
2013 Direct Fund 2013 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
---------------------------- --------- ------------------------ -------
Business Services &
Tuskerdirect Limited Buyout 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
---------------------------- --------- ------------------------ -------
Business Services &
Savers, Inc. Other Other +$0.02
---------------------------- --------- ------------------------ -------
Acelyrin Venture Medical & Biotech +$0.01
---------------------------- --------- ------------------------ -------
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 GBP20.76 per share for a total value of GBP14.2
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 GBP21.54 per share for a
total consideration of GBP19.8 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
.
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 (GBP40.42), 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 .
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 GBP20.76 per share for a total
consideration of GBP14.2 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 GBP23.84 per share for a total
consideration of GBP5.6 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 GBP21.54 per share for a total consideration of
GBP19.8 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 GBP21.30 on 20 October 2023, which
represents a 5.3% decrease compared with the GBP22.50 share price
recorded on 31 July 2023.
The market capitalisation of the Company as at 20 October 2023
was GBP1.7 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
31 July 2023 31 January 2023
(Unaudited) (Audited)
In US Dollars (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
and outstanding
at 31 July and 31 January 2023 respectively, no par value 3,930,578 3,837,926
------------------------------------------------------------------------------ ---------------- -----------------
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
31 July 2023 31 July 2022
In US Dollars (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
31 July 2023 31 July 2022
In US Dollars (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
31 July 2023 31 July 2022
In US Dollars (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 Partnership L.P. (Note
10) -($117,233)
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
as a %
Commitment Invested* Received Fair Value 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
as a %
Commitment Invested* Received Fair Value 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
Fund II L.P. 2,500 47,500 7,852 48,561 1.2
-------------------------------- -------------- -------------- -------------- -------------- ----------
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 EUR47,450,000.
** Fund denominated in euros. Commitment amount is EUR100,000,000.
Fund denominated in euros. Commitment amount is
EUR63,000,000.
++++ 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
Fair
Unfunded Amount Distributions Value
as a %
Commitment Invested* Received Fair Value of
Net
US Funds (in thousands) (in thousands) (in thousands) (in thousands) 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. 2,000 48,202 61,472 2,466 0.1
---------------- -------------------------- ------------------------- ---------------------------- -------------- ------
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 102,350 12,725 - 13,463 0.4
---------------- -------------------------- ------------------------- ---------------------------- -------------- ------
Harbourvest
Infrastructure
Income Delaware
Parallel
Partnership - 117,233 18,373 119,638 3.1
---------------- -------------------------- ------------------------- ---------------------------- -------------- ------
Total US Funds 1,054,393 2,343,743 2,362,798 1,533,549 40.0
---------------- -------------------------- ------------------------- ---------------------------- -------------- ------
Fair
Unfunded Amount Distributions Value
as a %
Commitment Invested* Received Fair Value of
International/Global Net
Funds (in thousands) (in thousands) (in thousands) (in thousands) 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
Fund II L.P. 2,500 47,500 2,710 50,745 1.3
---------------------- ------------------------- ------------------------- ---------------------------- -------------- ------
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 75,000 - - - -
III Feeder Fund L.P.
--------------------- ------------------------- ------------------------- ---------------------------- -------------- ------
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 EUR47,450,000.
** Fund denominated in euros. Commitment amount is EUR100,000,000.
Fund denominated in euros. Commitment amount is
EUR63,000,000.
++++ 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 GBP50,000 per annum, a secretarial fee of GBP60,000 per
annum, a compliance services fee of GBP15,000 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 GBP15,500, 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 (GBP)
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 EUR13.5
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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END
IR FFFFIIRLEFIV
(END) Dow Jones Newswires
October 26, 2023 02:00 ET (06:00 GMT)
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