Pantheon International, the listed private equity investment trust, has reported a 6.1% net asset value (NAV) return for the year ending 31 May 2024. This performance lagged behind the All-Share index, which rose by 15.4%, and the MSCI World index, which recorded a 22.2% increase.
Despite the modest NAV growth, shareholders benefitted from a 19.1% return thanks to the board's successful efforts to reduce the discount at which the shares trade. A £200 million share buyback programme, completed shortly after the financial year-end, contributed a significant 4.7 percentage points to the overall NAV return. This programme forms part of a new capital allocation policy implemented in June 2024, which allocates a portion of adjusted net cash flow to share buybacks on a tiered basis depending on the discount level.
The subdued NAV growth reflects lower valuation multiples rather than any underlying issues within the portfolio. Pantheon's portfolio companies delivered robust underlying performance, generating a 17% increase in EBITDA and a 14% rise in revenue during the year. Furthermore, the trust has a low loss ratio of just 2.3% across all investments, both realised and unrealised, over the past decade.
Highlights from the report:
Pantheon's portfolio is heavily weighted towards direct investments, with 54% allocated to co-investments, single-asset secondaries, and hard-to-access funds.
The trust recorded over 400 full exit events during the year, generating a weighted average uplift of 20%. Since 2012, the weighted average uplift from realised exits has been 30%.
The average cost multiple on exit realisations was 3.2 times during the full year and 3.0 times since 2012. The existing portfolio, as implied by the current NAV, has a cost multiple of 1.6 times, highlighting the significant embedded value within Pantheon's holdings.
The portfolio remains cash-generative, generating net cash inflow of £37 million during the period. Over the past ten years, Pantheon has generated a total of £1.6 billion in net cash.
As of 31 May 2024, Pantheon held £16 million in net available cash. A total of £83 million was drawn down from the £500 million credit facility, and £118 million of sterling equivalent loan notes were outstanding.
The trust's net debt to NAV, excluding the asset-linked note, was a conservative 8.1% as of 31 May 2024. The board anticipates that net leverage will not exceed 10% of NAV under normal market conditions.
Pantheon's financing cover stood at 3.9x, and its undrawn coverage ratio was a comfortable 89% as of 31 May 2024.
The next phase of Pantheon's corporate strategy:
Following the success of the initial share buyback programme and the new capital allocation policy, the board has outlined a third phase of its strategy. The chairman outlined their objective as follows: "To create more demand for Pantheon International's shares, and indeed for the listed private equity sector as a whole, thereby narrowing the discount between the share price and NAV sustainably."
This involves a multi-pronged approach including:
Enhanced communication: Engaging in two-way dialogues with investors, brokers, investment bodies, and fellow chairs of investment trusts to improve understanding and address concerns.
Assertive marketing: Implementing a more proactive marketing strategy to raise awareness and highlight the benefits of investing in listed private equity.
Sector-wide collaboration: Working with other players in the listed private equity sector to dispel common misconceptions about valuations, fees, and disclosure practices.
The chairman highlighted the need to address misconceptions surrounding the sector, including perceptions of inflated valuations, high fees, and lack of consistent disclosure. The statement emphasised the importance of educating investors about the benefits of private equity and ensuring transparency in areas like leverage and buybacks.
Pantheon has already taken steps to enhance its marketing efforts, appointing a new marketing agency and committing to increased marketing spend. The trust aims to improve clarity in its branding and communication, highlighting the long-term value proposition for investors.
The chairman concluded by emphasising the importance of building trust and goodwill within the market. This, he stated, is essential for attracting new investors who may be hesitant to invest in what can appear as a complex and opaque sector.
The statement highlights Pantheon's commitment to transparency and investor engagement, seeking to address the persistent discount and unlock the value embedded in its portfolio. The trust's record of performance and commitment to shareholder interests, coupled with its ambitious strategy, suggests that Pantheon is well-positioned to navigate the challenges of the listed private equity sector and deliver value for its investors.