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Johan De Silva
Posted: 08 December 2020 14:06:09(UTC)
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Note: This thread started over 2 years ago (near the very bottom of the COVID crash) and has over 2,390 posts and is over 260 pages long! Scroll to the bottom of this page and click on the last page or...

Jump to useful posts inside this thread listed here:

Updated 10/06/2023: Podcast: While the sector has a long-term record of outperformance, much of that has come in the unusual low-interest rate environment of the last decade. Can that continue even as rates normalize? Or are tougher times here to stay for the industry? Steers addresses the questions about discounts, valuations and costs swirling around the sector.
https://www.bloomberg.co...ryn-talks-money-podcast (added to the tread by MR_GL)

So where next for PE valuations and prices (in 2022)? - By Phil 2
https://moneyforums.city...uations-and-prices.aspx

iShares Listed Private Equity ETF vs IT's by Tim D (More for investors who just want to buy the PE market with both undervalue and overvalue trusts with no discount trading. For consideration in a buy and hold porfolio)
https://moneyforums.city...cussion.aspx#post180807

Unicorn Master Fund
https://moneyforums.city...cussion.aspx#post192215

Quick overview of Listed Private Equity? Jump to an overview by Bardolph: https://moneyforums.city...cussion.aspx#post179749

Useful external links:
LondonYank on post 183630 "Interesting data points around VC and PE performance from Cambridge Associates" https://www.cambridgeass...gh-private-investments/

"Private markets don’t ‘launder volatility’, honest"
https://www.ft.com/conte...ecedb43#comments-anchor

Cliff Asness (PE is 13 mins in)
https://www.bloomberg.co...0-strategy-market-risks

Have a general PE question?
Read the other PE thread about the sector in general: Private Equity's Meh Decade

Original post deleted to make the page shorter. BigBoy has quoted the original post...
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20 users thanked Johan De Silva for this post.
Davendra Patel on 09/12/2020(UTC), Fig Lee on 09/12/2020(UTC), xiang zou on 30/04/2021(UTC), foma looke on 05/07/2021(UTC), countrymum on 11/08/2021(UTC), Jesse M on 07/09/2021(UTC), kim shillinglaw on 28/10/2021(UTC), Nigel Harris on 30/10/2021(UTC), Phil 2 on 31/10/2021(UTC), Tim D on 06/11/2021(UTC), New Simon T on 14/12/2021(UTC), Kenpen2 on 02/01/2022(UTC), Ava96 on 28/01/2022(UTC), Bimble on 09/05/2022(UTC), Strangways on 12/05/2022(UTC), Law Man on 08/01/2023(UTC), Chalky W on 20/04/2023(UTC), Vital Signs on 21/04/2023(UTC), Nigel A on 17/07/2023(UTC), Old Jock on 26/10/2023(UTC)
Big boy
Posted: 09 December 2020 15:20:12(UTC)
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Johan De Silva;140491 wrote:
From what understand, and correct me if you disagree, monthly or quarterly NAV updates are based on:

1) Foreign exchange rates
2) M&A undertaken in the period
3) Fundraising values undertook by a holding in the period

But what happens less frequently is an independent valuation that is typically done in December. This takes into consideration:

1) Future earnings and balance sheet
2) Comparison to listed markets

A revaluation (or more of an adjustment) was this year unusually done in the middle of the year for Covid-19. Sometimes just a finger in the air percentage decrease applied (e.g HGT).

As we reach the end of the year, HVPE has over 74% portfolio valued as long ago as 30 June 2020. This is typical of most.

Given the rise in listed markets (since June), especially in certain sectors, there will be cases where NAV updates by late January should see a significant uplift at today's prices. Either that or public markets need to come down especially in technoology.


It all depends on the difference between the latest NAV and the last NAV. You need skill to anticipate the latest NAV which most of us do not have.
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Tim D on 09/12/2020(UTC)
DL3
Posted: 09 December 2020 15:38:33(UTC)
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At the PE firm where I work the marks are updated quarterly. The valuations are done by an independent third party. They are reviewed by auditors at year end.

99% of the balance sheet of a PE fund is investments. All the investments are categorized as level 3 according to the IFRS scale "unobservable inputs using estimates and assumptions which reflect those which other market participants would use".
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16 users thanked DL3 for this post.
Big boy on 09/12/2020(UTC), Johan De Silva on 09/12/2020(UTC), SimonHughes on 09/12/2020(UTC), Fig Lee on 09/12/2020(UTC), New Simon T on 09/01/2021(UTC), Stig on 04/04/2021(UTC), Mr Scruff on 09/04/2021(UTC), xiang zou on 30/04/2021(UTC), foma looke on 05/07/2021(UTC), Mike L on 31/07/2021(UTC), paul armstrong on 28/08/2021(UTC), Jesse M on 07/09/2021(UTC), mdss68 on 22/10/2021(UTC), Nigel A on 30/10/2022(UTC), Law Man on 02/10/2023(UTC), Guest on 16/10/2023(UTC)
Gary J
Posted: 09 December 2020 16:29:33(UTC)
#5

Joined: 22/02/2020(UTC)
Posts: 610
Johan De Silva;140491 wrote:


But what happens less frequently is an independent valuation that is typically done in December. This takes into consideration:

2) Comparison to listed markets



For eg Merian it seems the case that the quarterly valuations are no less comprehensive than the annual ones. From their prospectus:

Quote:
The Company considers it impractical to perform an in-depth valuation analysis for every unquoted
investment on a daily basis (whether internally or with the assistance of an independent third party).
Therefore, it is expected that an in-depth valuation of each investment will be performed by an independent third-party valuation firm: (i) on a quarterly basis; and (ii) where it is determined that a Triggering Event has occurred.


I guess having a quick look at the trading multiples of similar firms in the listed sphere is perhaps the least onerous of the evaluator's tasks so no pressing reason not to do it every quarter.
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Johan De Silva
Posted: 09 December 2020 16:56:53(UTC)
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@DL3 Thank you, really useful and helped to validate some of my assumptions. I already use public markets such as SP500 SAAS index against HGT for example with some adjustment for Europe (e.g. Blackrock downgraded Europe). Eagle-eyed "traders" may be seeing an opportunity in HGT's charts imminently so this is useful to know.

@Gary Good to know. I am fully confident on Merian from a simple qualitative look. It's really regarding the rest of my portfolio, for example, HVPE does not follow the same process so was seeing the discount narrow in comparison to the closest peer but now I expect it to widen in Jan.

@Big Boy So far very good this year. Looking to trim my LPE mid Q1 to buy US small-cap IT's.
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foma looke on 05/07/2021(UTC)
Keith Cobby
Posted: 09 December 2020 17:39:46(UTC)
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I gave up on PE as none of them can touch SMT and if they can't beat a good global fund then there is no point putting up with their lack of transparency and price volatility.
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Gasman
Posted: 09 December 2020 18:41:58(UTC)
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And eye watering charges that they admit to!!Add to them that are hidden.
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bédé on 03/08/2021(UTC), Thrugelmir on 17/12/2022(UTC)
Fig Lee
Posted: 09 December 2020 20:28:25(UTC)
#4

Joined: 23/12/2019(UTC)
Posts: 1,477
DL3;140702 wrote:
At the PE firm where I work the marks are updated quarterly. The valuations are done by an independent third party. They are reviewed by auditors at year end.

99% of the balance sheet of a PE fund is investments. All the investments are categorized as level 3 according to the IFRS scale "unobservable inputs using estimates and assumptions which reflect those which other market participants would use".



This process sounds very similar to a FTSE 100 REIT that I once worked in. In their case the property valuations had to be done externally by accountants and then audited before producing projections and rent earning triangulation's for next quarter.
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SKYSHIP
Posted: 14 December 2020 14:37:51(UTC)
#18

Joined: 06/11/2012(UTC)
Posts: 33
As DL3 stated above, most UK-listed PE trusts value investments quarterly; and even a cursory look across the sector reveals this to be the case. In addition to the regular monthly NAV updates, many trusts also make fairly regular Investor Presentations; always available on relevant websites.

PE trusts are no longer the closed book which some PIs still imagine.

The share prices quite naturally tend to move in a block, with more obvious disparities associated with disposal news.

Sometimes however you get market anomalies, often caused by an institution fulfilling a BUY or SALE move. Market anomalies of course provide market opportunities for those of a trading mentality.

It therefore helps to see all the players charts in one place:

https://uk.advfn.com/cmn...thread.php3?id=26570589
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Johan De Silva
Posted: 14 December 2020 15:06:07(UTC)
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SKYSHIP;141659 wrote:
As DL3 stated above, most UK-listed PE trusts value investments quarterly;
This is not always the case, and that is the point. The quarterly NAV report is not always an independent review of the investments. This proper valuation is done less frequently. As your an active trader you will be incorrectly valuing HVPE into Q4
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Pre Ka on 16/01/2024(UTC)
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