I still have a few holdings directly in private equity. Nothing happening other than two out of three have sought capital in the last year. Two I am confident will be long term businesses until they decide to sell. One, will likely fall away, however this has the highest potential to make large return if they can get some runs on the board. It is very difficult to get this start. The one in the mortgage lending platform space (no code platform, integrated with PEXA) has not sort funds since original investment and is picking up a lot of Tier 2 banks that will compete with the big 4 by using their platform. This business will likely list one day and is the best of the bunch so far.
There are no liquidations as yet. One I invested in shut down due to fraudulent directors.
The other private equity parts of portfolio is PAC and their subsidiaries. I have invested directly in VPC Specialty Lending. I see this as an arbitrage play more so. VSL:LSE has circa 80% of net assets lent to specialty lenders (buy now pay later or Amazon retail providers). VSL:LSE is liquidating all borrowings where feasible.
The sums for me as follows:
- Funds lent on remaining two to three year terms, discount at 6% per annum means 18-20% discount needed.
- 78p NAV
- Share price 46p
- 20% discount of 78p = 15.6p; 78p minus 15.6p = 62.4p
- 80% of 62.4p = 49.92p (this is guaranteed to be returned over three years)
The likelihood of return of capital is high as there will be two outcomes as follows:
- VPC will buy assets remaining (15.6p - assume a 10% discount)
- Return of 62.4p, 49.92p at 20% discount for DCF.
Risk is you get current share price returned, plus 3p. In a positive scenario you will get ~60p returned after liquidation of assets.
Note, I am invested where I will pay 0% tax on these earnings/distributions.
In terms of PAC’s portfolio, FUM raising in the US has slowed (see P10 Inc public announcements), but not significant enough that outflows are occurring. The benefit of PAC’s boutiques is the long term nature of contracts - five to ten years. This will see them through to next up cycle.
Expecting to hear good news from ROC Partners and Aether in their respective FUM raises by the end of this year. Aether will be the big one for PAC shareholders as this will return them to Tier 1 boutique status (+USD4M in earnings contributions).
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