TIDMHVPE
RNS Number : 2592E
HarbourVest Global Priv. Equity Ltd
27 October 2022
27 October 2022
RESULTS FOR THE SIX MONTHSED 31 JULY 2022
Relative resilience underpinned by diversified portfolio
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 2022.
-- Resilient net asset value ("NAV") per share performance against challenging backdrop
o NAV per share fell 2.7% over the six months to $47.76 (31
January 2022: $49.11)
o Majority of decline attributed to a fall in the public market
holdings (8% of the portfolio at 31 July 2022) and reductions in
the aggregate valuation of the European primary and direct venture
investments
-- Long-term NAV per share outperformance (see table below)
o Absolute NAV per share return of 319% over the ten years to 31
July 2022
o Equates to outperformance of the FTSE All World Total Return
("FTSE AW TR") index of 5.4 percentage points per annum over same
period
PERFORMANCE AS AT 31 JULY 2022
Since
inception
1y 3y 5y 10y (2007)
============================== ===== ==== ===== ===== ===========
NAV per share ($)* 8% 85% 139% 319% 378%
============================== ===== ==== ===== ===== ===========
Share price total return
($) -8% 35% 73% 306% 185%
Share price total return
(GBP) 7% 40% 90% 426% 379%
============================== ===== ==== ===== ===== ===========
FTSE AW total return
($) -10% 30% 50% 159% 127%
NAV per share outperformance
vs FTSE AW TR index ($)** 18% 55% 89% 160% 251%
Annualised NAV per share
outperformance vs FTSE
AW TR index ($)** n/a 14% 11% 5% 5%
============================== ===== ==== ===== ===== ===========
*Final unaudited NAV per share figures used (not July monthly
estimates)
** '%' here refers to percentage point outperformance
-- Robust distributions slightly outpaced by capital calls
o Capital calls of $276 million for new investments (six months
to 31 July 2021: $234 million)
o Distribution proceeds of $272 million received (six months to
31 July 2021: $295 million)
o Distributions boosted by the partial redemption of HVPE's
holding in Adelaide, the global infrastructure and real assets
vehicle
-- Balance sheet remains strong
o $272 million of cash (31 January 2022: $284 million)
o Total new commitments of $615 million over period (six months
to 31 July 2021: $387 million)
o Credit facility increased by $100 million to $800 million
post-period end; remains undrawn
-- Share buybacks conducted during September
o Total of $18.8 million (GBP17.0 million) purchased
o Proceeds allocated to the buyback from the sale of tail-end
assets now deployed
Ed Warner, Chair of HVPE, said:
'HVPE delivered relatively robust performance over the period,
testament to its resilient and well-diversified portfolio.
"There is little doubt that a challenging period lies ahead; one
that favours prudence, discipline, and patience. These qualities
are embodied in the approach taken by our Investment Manager,
HarbourVest Partners, through successive market cycles over a
period of 40 years.
"By investing in HarbourVest funds we are backing the best
private markets managers who have experience in both navigating
challenging periods, and pursuing attractive investment
opportunities wherever they may appear."
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 Wednesday, 2
November 2022, 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 2022. The presentation will be available to
view and download from www.hvpe.com at 11:00AM GMT today.
-S -
Enquiries:
HVPE
Richard Hickman Tel: +44 (0)20 7399 rhickman@harbourvest.com
9847
Charlotte Edgar Tel: +44 (0)20 7399 cedgar@harbourvest.com
9826
HarbourVest Partners
Lily Cabianca Tel: +44 (0)20 7151 lcabianca@harbourvest.com
4261
MHP Communications
Charlie Barker / Tel: +44(0)20 3128 hvpe@mhpc.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 40
years of experience.
About HarbourVest Partners, LLC:
HarbourVest is an independent, global private markets firm with
40 years of experience and more than $100 billion of assets under
management as of June 30, 2022. The firm's interwoven platform
provides clients access to global primary funds, secondary
transactions, direct co-investments, real assets and
infrastructure, and private credit. HarbourVest's strengths extend
across strategies, enabled by its team of more than 1,000
employees, including more than 190 investment professionals across
Asia, Europe, and the Americas. Across its private markets
platform, the HarbourVest team has committed more than $52 billion
to newly-formed funds, completed over $43 billion in secondary
purchases, and invested over $31 billion in directly operating
companies. HarbourVest partners strategically and plans its
offerings innovatively to provide its 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.
Epidemics, Pandemics and Other Health Risks - Many countries
have experienced infectious illnesses in recent decades, including
swine flu, avian influenza, SARS and 2019-nCoV (the "Coronavirus").
In December 2019, an initial outbreak of the Coronavirus was
reported in Hubei, China. Since then, a large and growing number of
cases have been confirmed around the world. The Coronavirus
outbreak has resulted in numerous deaths and the imposition of both
local and more widespread "work from home" and other quarantine
measures, border closures and other travel restrictions causing
social unrest and commercial disruption on a global scale. The
World Health Organization has declared the Coronavirus outbreak a
pandemic. The ongoing spread of the Coronavirus has had and will
continue to have a material adverse impact on local economies in
the affected jurisdictions and also on the global economy as
cross-border commercial activity and market sentiment are
increasingly impacted by the outbreak and government and other
measures seeking to contain its spread. In addition to these
developments having potentially adverse consequences for underlying
portfolio investments of the HarbourVest funds and the value of the
investments therein, the operations of HVPE, the Investment
Manager, and HVPE's portfolio of HarbourVest funds have been, and
could continue to be, adversely impacted, including through
quarantine measures and travel restrictions imposed on personnel or
service providers based around the world, and any related health
issues of such personnel or service providers. Any of the foregoing
events could materially and adversely affect the Investment
Manager's ability to source, manage and divest its investments and
its ability to fulfil its investment objectives. Similar
consequences could arise with respect to other comparable
infectious diseases.
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) 2022 HarbourVest Global Private Equity Limited. All rights
reserved.
C hair's statement
At the beginning of 2022, we might have hoped for a return to
some degree of normality as the COVID-19 related disruption began
to subside. Needless to say, subsequent events quickly dispelled
such optimism, and the world once again finds itself in challenging
times. The war in Ukraine has exacted an appalling human cost,
while the resulting disruption to energy and commodity markets has
stoked a burgeoning cost-of-living crisis around the globe. Central
banks, in an effort to bring inflation under control, are raising
interest rates sharply. Businesses are struggling to deliver the
goods and services that their customers expect, whilst at the same
time protecting margins and securing returns for their investors.
It is not surprising in this environment that there has been
downward pressure on valuations across a broad range of asset
classes.
Against this backdrop, HVPE's portfolio has remained relatively
resilient, aided by its significant diversification. Over the first
six months of this financial year we have experienced only a
marginal decline in net asset value per share. The share price, by
contrast, has diverged from the NAV quite markedly in recent
months, as shown in the KPIs section on page 6. After reaching an
all-time high in early January of this year, the shares have
de-rated sharply along with broader equity markets and peers. While
this is undeniably disappointing, returns to shareholders over
longer timeframes remain strong, having delivered a total
shareholder return in sterling of almost five times over a ten-year
period. HVPE performance remains ahead of public markets, as
measured by the FTSE AW TR index, and it is this impressive track
record that continues to provide reassurance. I would like to thank
all those shareholders who have maintained their support for us,
and also those who have joined the register during these unsettling
times.
There is little doubt that a challenging period lies ahead; one
that favours prudence, discipline, and patience. These qualities
are embodied in the approach taken by our Investment Manager,
HarbourVest Partners, through successive market cycles over a
period of 40 years. History has shown that investing through
difficult times can often produce the strongest returns. I have
confidence that the professionals at HarbourVest today have the
experience and expertise to see us through the current downturn.
Furthermore, the Board remains active in its engagement with the
Investment Manager and other key stakeholders, with the aim of
ensuring the best possible outcome for HVPE's shareholders over the
long term.
Six months to 31 July 2022
Financial Performance
Despite the challenging macroeconomic backdrop, portfolio
performance held relatively steady over the six months, with NAV
per share declining by a modest 2.7%. This is significantly ahead
of global public equity market performance as indicated by the FTSE
AW TR index, which fell 10% over the same period. Nevertheless, we
are focused primarily on longer term metrics when assessing
returns, and I am pleased to report that over the 10-year period to
31 July 2022, HVPE outperformed the FTSE AW TR index by 5.4
percentage points per annum.
The majority of the decrease in NAV can be attributed to a fall
in the public market holdings (8% of the portfolio at 31 July 2022)
and aggregate decline in the valuation of the European primary and
direct venture investments. We note there is some scepticism
generally around the valuation of private companies in the current
climate, and we acknowledge the inherent time lag versus the public
markets. This is an intrinsic challenge when investing in private
businesses, and HVPE's portfolio, given its scale and level of
diversification, might tend to appear relatively opaque when viewed
in a public market context. We have responded to this by including
more granular breakdowns of HVPE's portfolio growth by stage,
strategy and geography on pages 20 and 21 to help in part to
address this issue, and to provide greater transparency for our
shareholders.
Balance Sheet and Portfolio Cash Flows
In contrast to the first half of the prior financial year when
distributions from our investments exceeded capital calls by $61
million, this year we saw a marginal reversal. In the six months to
31 July 2022, we had net negative cash flow of $4.7 million, as
distributions were slightly outpaced by capital calls.
Distributions were boosted by the partial redemption of our holding
in Adelaide, the global infrastructure and real assets vehicle.
This was realised at a premium to the value of HVPE's original
investment, and as previously communicated, HVPE is set to benefit
from a share of management fee revenue from a new structure for the
vehicle in return for having backed it as its first seed
investor.
The IPO window has remained closed during the period, and the
vast majority (95%) of the known exit transactions in the portfolio
were trade or sponsor sales, i.e. M&A. By number they were down
on the same period last year, split broadly evenly between buyout
and venture companies.
The robust portfolio performance has meant our commitment plan
has remained on-track over the first half of the financial year. In
total we committed $615 million to new HarbourVest funds, as we
resolve to be fully invested to optimise NAV returns. The largest
commitment in the period (41%) was to a US-focused buyout fund of
funds, helping shift the portfolio closer to our five-year
Strategic Asset Allocation ("SAA") targets by stage. Currently
buyouts are slightly underweight (54% against a target of 60%)
following recent strong performance from the venture and growth
equity portion of the portfolio, which remains overweight (37%
against a target of 30%).
At the end of the six-month reporting period we had $272 million
of cash on the balance sheet, and zero drawings on our $700 million
credit facility.
Environmental, Social, Governance ("ESG")
The HVPE Board is committed to improving its focus on ESG
matters, and remains keen to highlight the efforts of the
Investment Manager where possible. At the Capital Markets event
held for shareholders in June this year, we included an ESG panel
on the agenda, which provided a discussion around live topics and
an update from HarbourVest on ESG across each of the strategies at
the investment level.
We believe that a focus on continuous improvement in this area
can help deliver superior returns, and therefore place a high
priority on the integration and monitoring of ESG at both the HVPE
and HarbourVest levels. The manager continues to develop its
capabilities in this space, and a link to their most recent ESG
report can be found on page 17. A more detailed update will be
provided in the 2023 Annual Report and Accounts that will be
published next May.
Post-Period End
Board Actions
Share Buybacks
The Investment Manager conducts regular reviews of the case for
share buybacks from a capital allocation perspective, using an
established framework based on a number of criteria as referred to
on page 24 of the Company's 2022 Annual Report and Accounts,
available at
https://www.hvpe.com/shareholders/reports-presentations/reports/
.
At the time of the publication of the 2022 Annual Report and
Accounts, having consulted with our advisers, we concluded that
reinvesting capital into new private markets opportunities, rather
than buying back shares, should provide a better outcome for our
shareholders over the long term. This remains our core
presumption.
When HVPE's share price moved to an exceptionally wide discount
to net asset value over the summer, a review was again conducted.
As on this occasion all the criteria were satisfied, we decided
that repurchasing the Company's shares at this exceptional discount
represented an attractive investment and an appropriate allocation
of capital. A recent sale of tail-end positions within HVPE's
portfolio provided incremental cash flow, ahead of original
projections for 2022. The excess proceeds from this non-routine
transaction provided meaningful capital for share buybacks while
helping to ensure that HVPE's liquidity position remains robust
against the backdrop of an increasingly changeable macroeconomic
environment. Since the period end, therefore, our joint brokers
Jefferies and Peel Hunt have between them bought back 757,864
shares for cancellation at an average price of GBP22.40 per share
for a total value of GBP17.0 million ($18.8 million). This exercise
has added $0.24 to NAV per share.
Credit Facility Increase
In August 2022 we increased our credit facility by $100 million
to $ 800 million. The enlarged facility underpins the growth of the
Company as it continues to scale and as commitments need to
increase to remain fully invested. We are pleased to have
diversified the lender base further, by adding a third, non-bank
lender, to the syndicate: The Guardians of New Zealand
Superannuation, a Crown entity established to manage the New
Zealand Superannuation Fund. The additional lending was arranged by
Credit Suisse. At the time of writing, the facility remained
undrawn.
Meeting the Manager
The Board maintains a strong relationship with its Investment
Manager, and ensures that there are regular opportunities for
dialogue. As we return to a more normal working world post
COVID-19, the Board will be conducting an in-person due diligence
exercise in Boston this December. We believe this is an opportune
time for structured engagement with the investment professionals
charged with managing shareholders' capital.
Outlook
As investors we find ourselves navigating another period of
heightened uncertainty. Geopolitical unrest and macroeconomic
disruption are besetting equity and fixed income markets
simultaneously, presenting a new challenge for traditional
portfolios previously thought to offer resilience during downturns.
Private markets will not be immune, but investors in this space are
now more sophisticated than ever before, and are well-positioned to
seize opportunities wherever they may appear. For HarbourVest, this
means backing the best managers with a proven ability to navigate
through difficult periods, as well as pursuing the attractive
secondary and co-investment opportunities already appearing as a
result of market turbulence.
Over time, HVPE has built a broad and well-diversified
portfolio. As a reminder, no company represents more than 2.4% of
investment portfolio NAV. There are major benefits to this
diversification: fundamentally, it enables us to capture more
outperformers whilst helping to reduce risk. Furthermore, at a
higher level, different segments of the portfolio tend to perform
well at different times, helping to stabilise HVPE's NAV
returns.
The private equity model has proven resilient during previous
downturns, in part because the incentives of owners and managers
are aligned. It is during periods of disruption that the best
managers prove their worth, maintaining good returns for investors
while giving due consideration to other stakeholders. HVPE's
structure ensures that a range of skilled investment professionals
around the world are focused intently on delivering the results
that our shareholders have come to expect. We believe HVPE should
be seen as a core holding in any long-term portfolio, providing
broad and diverse exposure to a fully managed programme run by a
leading global private markets asset manager.
Ed Warner
26 October 2022
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 of the Board's governance and oversight
are described on pages 71 to 89 of the 2022 Annual Report and
Accounts.
Risk Appetite
The Board's investment risk appetite is to follow an
overcommitment 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. As a baseline, the
Board will seek to follow best practice and remain compliant with
all applicable laws, rules, and regulations.
Risk Management
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. 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. These principal risks are described
below and remain unchanged from the Company's last Annual Report
and Accounts.
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 challenging macroeconomic and geopolitical
environment has resulted in increasing inflation, increasing
interest rates, volatility in public markets, and reduced activity
in private markets. This has directly increased the public market
risks faced by the Company, feeding through into private market
valuations and cash flows. This in turn has increased the balance
sheet risks, as lower or negative cash flows and potentially a
lower Net Asset Value puts pressure on the ratios used by the
Directors to manage the balance sheet. In this environment, the
popularity of the listed private equity sector has also come under
pressure, as demonstrated by the Company's and peers' share price
discounts to NAV per share increasing.
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 24 and 25 for the
Director's 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.
------------------------------------------ --------------------------------------------------------------------------
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 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
16 years' experience in the listed private equity sector.
Investment Manager's report
Introduction
In the six months to 31 July 2022, HVPE recorded a decline in
NAV per share of 2.7%. As public equity markets turned down in the
face of a challenging macroeconomic and geopolitical environment,
investors began to worry about the potential impact on private
market portfolios, particularly those with significant exposure to
venture-backed technology companies.
HVPE's allocation to venture capital and growth equity funds
represented 37% of Investment Portfolio NAV at the end of the
reporting period. As might be expected, valuations in this part of
the portfolio experienced downward pressure in the period,
resulting in a decline of 8.0% following last year's record gain of
46%. Meanwhile, buyout funds, the largest category within HVPE's
portfolio at 54% of Investment Portfolio NAV, proved relatively
robust, posting a small loss of 1.3% in the period. Buyout
managers' focus on mature businesses operating in resilient sectors
such as healthcare and business services, which experienced less of
a negative valuation impact in the period, helped them to buck the
trend of recent years whereby venture and growth equity had tended
to outperform. Similarly, the InfRA [1] and mezzanine exposure,
which makes up the remaining 9% of the portfolio and lagged the
other categories last year, delivered a gain of 4.5%. We are
reminded that different segments within the Company's
well-diversified global portfolio, with its broad exposure to a
number of uncorrelated strategies, sectors and investment themes,
tend to perform well at different points in the cycle, with the
better performers helping to offset headwinds from the more
challenged areas, stabilising performance at the level of HVPE's
total NAV.
The overall change in NAV in the period was the net result of
two opposing contributory factors: realised gains of $119 million
were more than offset by unrealised losses of $220 million. The
gains on realisations demonstrate once again that underlying
managers in HVPE's fund of funds portfolio are able to time exit
processes to achieve good results, even in an otherwise
unfavourable environment. While there were no material IPOs in the
period, General Partners ("GPs") continued to sell their existing
holdings of public equity arising from the IPOs of 2021, and trade
sales were relatively strong, contributing to an average uplift on
carrying value of 40%.
The decline in unrealised value was led by the public equity
holdings that remained unsold in the period. Combined, these
accounted for 12% of the portfolio at the beginning of the period,
and had fallen to 8% by 31 July 2022, with the difference largely
due to falling share prices combined with the impact of weakening
European and Asian currencies against HVPE's functional currency,
the US dollar.
While we must acknowledge the highly uncertain environment in
which we find ourselves, the fall in HVPE's share price from its
January 2022 peak to 31 July 2022 is clearly disproportionate to
the modest NAV decline. We are aware that, as a constituent of the
FTSE 250 index, HVPE shares are often traded as part of a "UK
basket" and therefore susceptible to negative investment flows
arising from political and macroeconomic events beyond the
Company's control. This phenomenon, combined with weakening
investor sentiment more generally, may be impacting the London
listed private equity sector as a whole, given that HVPE's current
discount to NAV, while extreme, is nevertheless broadly aligned
with those of our fund of funds peers [2] . The widening of HVPE's
discount in the year to date is not consistent with the Investment
Manager's current outlook for NAV per share performance, based on
the position of public market valuations today and our insight into
the performance of HVPE's underlying investments.
Private Markets Industry [3]
Private markets activity in the first half of the year has
slowed from the record-breaking pace in 2021 across a variety of
metrics. In terms of exit activity, exit value and count have
slowed in both the US and Europe, trending back down to historical
long-term averages after a stellar 2021. The effects have been felt
most acutely in the IPO market, which has been effectively closed
as heightened volatility deterred potential sellers.
New deal activity, whilst slower relative to 2021, set a healthy
pace in the first half of the year by longer-term historical
standards as private market investors continued to identify
attractive opportunities for capital deployment. As central banks
continue to raise interest rates in the battle against inflation,
investors are attempting to price in a number of knock-on effects,
creating greater uncertainty, but also opportunity, for experienced
private markets managers with a history of navigating previous
crises over the last several decades.
Outlook [4]
Public and private markets may suffer further setbacks in the
months ahead, but it is important to note that private markets
managers tend to invest with a time horizon of several years, and
thus have an ability to ride out short-term volatility. While the
public markets may be discounting near-term declines in venture
capital valuations, the experienced managers in HVPE's portfolio
continue to back companies set to benefit from secular growth
trends across a number of key technology themes, such as payment
solutions, secure communications, data analytics and cybersecurity.
Furthermore, opportunities exist across a broad range of sectors
where technology-enabled solutions have the potential to deliver a
step-change in the growth rates of well-established operating
companies. Meanwhile, in the buyout portfolio, managers are backing
market-leading companies across a broad range of industries,
providing them with the capital to acquire smaller competitors at
attractive valuations, thereby capturing value-oriented
opportunities not available to public market investors.
In common with HarbourVest and many of the underlying managers
in the portfolio, HVPE takes a long-term view. Indeed, the
Company's structure, which is centred in large part around fund of
funds vehicles, promotes steady investment year after year. Recent
new commitments to the HarbourVest primary funds will be called for
investment slowly and consistently over a multi-year timeframe,
helping to ensure a dollar-cost averaging effect whereby HVPE does
not have disproportionate exposure to any single vintage. We
believe that this, combined with the broad diversification across
sector, strategy and stage, will stand HVPE in good stead as we
navigate a more challenging environment. HarbourVest has a 40-year
history spanning multiple periods of economic dislocation, and as a
result we believe HVPE continues to be well positioned for the long
term.
NAV per share - Six Months to 31 July 2022
HVPE's NAV per share declined by 2.7% in the six months to 31
July 2022, ending the first half of the financial year at $47.76.
Meanwhile, the FTSE AW TR Index (in US dollars), fell by 10% in the
same period.
Over longer timeframes, HVPE's NAV per share return has been
very strong. The 31 July 2022 figure of $47.76 is more than double
the NAV per share figure reported five years earlier (31 July 2017:
$19.98) and represents over a four-fold increase from the
respective figure 10 years earlier (31 July 2012: $11.41). 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 18. We believe that diversification in general is
essential to achieving consistently strong returns from a private
markets portfolio. As at 31 July 2022, no single company
represented more than 2.4% of the Investment Portfolio value (31
January 2022: 1.7%), helping to mitigate company-specific risk. The
top 100 companies in the portfolio represented 30% of total value
(31 January 2022: 32%), while the top 1,000 companies represented
84% (31 January 2022: 84%).
In percentage terms, the Secondary portfolio was the best
performing strategy, delivering value growth of 1.3% over the six
months. Geographically, all regions declined to some extent, with
the Asia region faring best and holding broadly flat over the six
months ended 31 July 2022. In terms of stage, Mezzanine and
Infrastructure & Real Assets was the strongest performer,
growing 4.5% over the six months ended 31 July 2022, though this
was offset by a reduction in the value of the Venture & Growth
Equity stage assets, as mentioned above. More information on the
drivers can be found on pages 20 and 21.
As at 31 July 2022, HVPE held investments in 59 HarbourVest
funds and 17 secondary co-investments [5] (compared with 57 and 16,
respectively, at 31 January 2022). Of these, the largest fund
contributors to NAV per share movement in absolute terms during the
six months to 31 July 2022 are described below:
-- Fund X Venture, a US-focused venture fund of funds, was the
largest (negative) contributor over the reporting period, reducing
NAV per share by $0.34. With a vintage year of 2015, this fund is
in its growth phase.
-- Co-Investment IV AIF, a global direct co-investment fund, was
next largest in absolute terms, reducing NAV per share by $0.28.
With a vintage year of 2016, this fund is in its growth phase.
-- Fund IX Venture, a US-focused venture fund of funds, was the
third largest contributor over the reporting period, reducing NAV
per share by $0.20. With a vintage year of 2011, this fund is in
its mature phase.
-- Fund XI Buyout, a US-focused buyout fund of funds, was next
in absolute terms, and was a positive contributor by adding $0.18
to NAV per share. With a vintage year of 2018, this fund is in its
investment phase.
-- Following Fund XI Buyout was Dover Street X, a 2019 vintage
global secondary fund, which added $0.13 to NAV per share.
Please note the movement in the above funds all came
predominantly from unrealised returns over the period.
All of the remaining HarbourVest funds in the portfolio combined
contributed to an aggregate $0.07 decrease to HVPE's NAV per share
over the six-month period.
Fund Movement [6]
NAV per Share at 31 Jan 2022 $49.11
Fund X Venture -$0.34
Co-Investment IV AIF -$0.28
Fund IX Venture -$0.20
Fund XI Buyout +$0.18
Dover Street X +$0.13
Other HarbourVest Funds [7] -$0.07
Management Fees [8] -$0.15
Performance Fees [9] $0.04
Net Operating Expenses [10] -$0.08
Foreign Currency -$0.58
NAV per Share at 31 Jul 2022 $47.76
============================== =======
Portfolio Cash Flows and Balance Sheet
In the six months to 31 July 2022, HVPE received cash
distributions of $272 million (six months to 31 July 2021: $295
million) while funding capital calls of $276 million for new
investments (six months to 31 July 2021: $234 million). The result
was net negative cash flow of $4.7 million over the reporting
period, with HVPE's cash balance decreasing marginally from $284
million as at 31 January 2022 to $272 million as at 31 July
2022.
Distributions were driven in large part by a particularly strong
month in March 2022, during which cash proceeds of $112 million
were received, largely from the Primary funds. This contributed
over 40% of the total distributions over the period. Negligible
distribution amounts were received in April and May ($1.3 million
collectively), before an uptick in June and July, with a combined
$137 million received.
A meaningful portion of the July 2022 cash distributions ($53
million, or 80%) came from the redemption of part of HVPE's
interest in Adelaide, the HVPE-seeded global infrastructure and
real assets vehicle, as a result of its planned conversion into a
permanent capital vehicle. In line with the approved base case plan
from 2018, HVPE exercised its right to redeem 50% of its original
commitment, while rolling the remainder into the new vehicle. Due
to the strong performance of this vehicle, the realisation was made
at a premium to the value of HVPE's original investment. More
distributions are expected from this partial redemption in the
coming months. As communicated at the time, HVPE stands to receive
a share of management fee revenue from the new vehicle in return
for having backed Adelaide as the first seed investor.
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 $210 million (76%) of the
total calls, and came from a broad mix of HarbourVest funds. The
majority of total calls by value (74%) were into primary
opportunities. The top ten HarbourVest fund distributions totalled
$167 million, or 62% of the total proceeds received in the period.
Distributions by value were split between primary investments (63%)
and secondary investments (31%), with the remainder coming from
direct co-investments.
Top Five HarbourVest Fund Calls
HarbourVest Fund
Name Vintage Year Description Called amount
----------------------- ------------- -------------------------------- -------------
Fund XI Buyout 2018 US-focused buyout fund of funds $37m
----------------------- ------------- -------------------------------- -------------
International multi-strategy
HIPEP IX 2020 fund of funds $34m
----------------------- ------------- -------------------------------- -------------
HIPEP VIII Partnership International multi-strategy
AIF 2017 fund of funds $24m
----------------------- ------------- -------------------------------- -------------
Global multi-strategy fund
2021 Global Fund 2021 of funds $22m
----------------------- ------------- -------------------------------- -------------
US-focused venture fund of
Fund XI Venture 2018 funds $22m
----------------------- ------------- -------------------------------- -------------
Top Five HarbourVest Fund Distributions
HarbourVest Fund Distributed
Name Vintage Year Description amount
---------------------- ------------- ------------------------------- -----------
Global infrastructure and real
Adelaide 2018 assets fund $54m
---------------------- ------------- ------------------------------- -----------
US-focused venture fund of
Fund XI Venture 2018 funds $16m
---------------------- ------------- ------------------------------- -----------
International multi-strategy
HIPEP VII Partnership 2014 fund of funds $14m
---------------------- ------------- ------------------------------- -----------
Global multi-strategy fund
2015 Global Fund 2015 of funds $14m
---------------------- ------------- ------------------------------- -----------
2016 Global Fund Global multi-strategy fund
AIF 2016 of funds $13m
---------------------- ------------- ------------------------------- -----------
HVPE has indirect exposure, on a look-through basis, to a pro
rata share of borrowing carried on the balance sheets of some of
the HarbourVest funds in which HVPE is a Limited Partner ("LP")
(referred to as HarbourVest Partners ("HVP") fund-level borrowing).
It is important to note that HVPE has no additional liability for
these borrowings beyond its uncalled commitments to each fund. The
majority of this fund-level borrowing represents delayed capital
calls, as a portion of the unfunded commitments has been invested
through the use of subscription credit lines at the HarbourVest
fund level, but the capital has not yet been called from HVPE.
As at 31 July 2022, HVPE's share of HVP fund-level borrowing on
a look-through basis was $541 million, a net increase of $91
million from $450 million reported at 31 January 2022. Expressed as
a percentage of NAV, this figure increased from 11% to 14% over the
six-month period. This increase can be attributed directly to the
larger commitments HVPE has made recently to newer HarbourVest fund
of funds, and, as is common at the outset of a fund's launch, the
use of working capital facilities to reduce the burden of multiple
capital calls from Limited Partners ("LPs"). Three new funds - Fund
XII Buyout, Asia Pacific 5 and HIPEP IX - contributed $88 million
(or 97%) of the increase.
In order to estimate the total potential gearing effect on NAV,
an investor should take the total fund-level borrowing figure of
$541 million and factor in HVPE's net cash/debt position at the
Company level (net cash $272 million). As at 31 July 2022, the
resulting net total borrowing figure of $269 million would
translate to an approximate level of look-through gearing of 7%.
Further detail on the credit facility and the criteria upon which
it can be drawn can be found under Note 6 Debt Facility on page 40
of the Unaudited Condensed Interim Consolidated Financial
Statements.
M&A Transactions and IPOs
During the six months ended 31 July 2022, there were a total of
131 known Merger & Acquisition ("M&A") transactions and
IPOs. This represents a 59% drop from the exceptionally high number
seen in the six months to 31 July 2021 (319), which reflected the
strong rebound in transactions post COVID-19. However, the levels
in this reporting period are a little ahead of the 119 seen in the
six months to 31 July 2020.
Approximately 95% (125) of these transactions were M&A:
trade sales or sponsor-to-sponsor transactions, with the remaining
5% (six) being IPOs. While the 125 M&A transactions accounted
for the majority of this period's total, by number they are a
little below the five-year average of 158 (looking across February
to July). Unsurprisingly, the number of IPOs (six) is significantly
lower than the February to July five-year average of 50. 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.
There was an approximately even split across buyout and venture
transactions where, of HVPE's total 131 known M&A transactions
and IPOs, 70, or 53%, related to buyout-backed companies. The
remainder (61, or 47%) related to venture-backed companies. Over
the six-month period, the weighted average uplift to
pre-transaction carrying value for a large sample of transactions
was 40%.
The top five M&A transactions during the period (by
contribution to HVPE NAV per share) are listed below. The six IPOs
during the period were not material contributors to NAV per share
and have therefore not been itemised in this report.
Top Five M&A transactions Top Five IPO transactions
(by contribution to HVPE NAV per share Note there were no material IPOs that
[11] )Viroclinics Biosciences contributed more than +$0.01 to NAV
B.V. +$0.10 per share
------------------------ ------
Kuoni Group +$0.05
------------------------ ------
Dynapower Holdings
LLC +$0.05
------------------------ ------
Captive Resources,
LLC +$0.04
------------------------ ------
C&K Components Inc +$0.02
------------------------ ------
--------------------------------------- --------------------------------------
HVPE Activity: New Fund Commitments
In the six months ended 31 July 2022, HVPE made total
commitments of $615 million across six HarbourVest funds and one
secondary co-investment (six months to 31 July 2021: $387 million).
The increased level of commitments during the reporting period is
in part due to the lower level of commitments made in 2020 due to a
pause in the middle of that year, but also a result of the growing
size of the Company's portfolio. As HVPE continues to scale, we
would expect commitments to increase; this is to ensure that HVPE
remains fully invested rather than building up an excessive cash
balance. Total unfunded commitments were $2.8 billion as at 31 July
2022, representing an increase of $337 million from 31 January 2022
($2.5 billion).
Of the total capital committed in the period, the largest
commitment ($250 million or 41%) was made to a US-focused buyout
fund of funds. A complete list of the commitments can be found on
page 19. 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.
HVPE's Approach to ESG
Core to HVPE's purpose is investing in a responsible manner.
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.
HarbourVest continues to make great strides in ESG and has
recently published an updated ESG report, available at
https://viewpoints.harbourvest.com/esg-annual-report/ . For the
first time, it has produced a Diversity and Inclusion Report,
available at
https://viewpoints.harbourvest.com/inaugural-dei-report/ . HVPE
will report more detail on the developments in next year's Annual
Report and Accounts which will be published in May 2023.
Diversification at 31 July 2022 [12]
Geography
------------------------------------------- -----
North America 62%
------------------------------------------- -----
Europe 20%
------------------------------------------- -----
Asia 15%
------------------------------------------- -----
Rest of World 3%
------------------------------------------- -----
Stage
------------------------------------------- -----
Buyout 54%
------------------------------------------- -----
Venture & Growth Equity 37%
------------------------------------------- -----
Mezzanine, Infrastructure & Real Assets 9%
------------------------------------------- -----
Strategy
------------------------------------------- -----
Primary 53%
------------------------------------------- -----
Secondary 28%
------------------------------------------- -----
Direct Co-investment 19%
------------------------------------------- -----
Phase
------------------------------------------- -----
Investment 54%
------------------------------------------- -----
Growth 38%
------------------------------------------- -----
Mature 8%
------------------------------------------- -----
Industry
------------------------------------------- -----
Tech & Software 32%
------------------------------------------- -----
Consumer 14%
------------------------------------------- -----
Medical & Biotech 13%
------------------------------------------- -----
Financial 11%
------------------------------------------- -----
Industrial & Transport 11%
------------------------------------------- -----
Business Services & Other 10%
------------------------------------------- -----
Energy & Cleantech 5%
------------------------------------------- -----
Media & Telecom 4%
------------------------------------------- -----
Currency
------------------------------------------- -----
US dollar 83%
------------------------------------------- -----
Euro 13%
------------------------------------------- -----
Sterling 2%
------------------------------------------- -----
Australian dollar 1%
------------------------------------------- -----
Other 1%
------------------------------------------- -----
Recent events
New Commitments Since 31 July 2022
Between 1 August 2022 and 26 October 2022, no new commitments
were made to HarbourVest funds.
HVPE Estimated NAV as at 30 September 2022
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 21 October, HVPE published an estimated NAV per share at 30
September 2022 of $47.15 (GBP42.21), a decrease of $0.61 (1.3%)
from the final 31 July 2022 NAV (US Generally Accepted Accounting
Principles ("GAAP")) figure of $47.76. This latest NAV per share is
based on a valuation breakdown of: 9% as at 30 September 2022
(reflecting 7% public company holdings and 2% direct
co-investments) and 91% actual 30 June 2022. Consistent with
previous estimated NAV reports, valuations are also adjusted for
foreign exchange movements, cash flows, and any known material
events to 30 September 2022.
The Investment Pipeline of unfunded commitments decreased from
$2.8 billion at 31 July 2022 to $2.6 billion at 30 September 2022,
based on the new commitments, capital funded, and taking foreign
exchange movements into account.
HVPE's cash and cash equivalents also decreased from $272
million at 31 July 2022 to $236 million at 30 September 2022.
HVPE's look-through exposure to borrowing at the HarbourVest
fund level had decreased by $51 million, from $541 million at 31
July 2022 to $490 million at 30 September 2022. The latest balance
sheet ratios can be found in the factsheet on the HVPE website:
www.hvpe.com .
Credit Facility
On 16 August 2022, HVPE announced a $100 million increase to its
credit facility, from $700 million to $800 million. The additional
$100 million was arranged by Credit Suisse AG London Branch
("Credit Suisse") and is being provided by The Guardians of New
Zealand Superannuation, a Crown entity established to manage the
New Zealand Superannuation Fund. The initial term of the $100
million extension is five years, with the potential to extend this.
This complements the existing $400 million provided by Credit
Suisse and $300 million provided by Mitsubishi UFJ Trust Banking
Corporation, acting through its New York Branch. More details can
be found on the HVPE website: www.hvpe.com .
At the end of September 2022, HVPE's credit facility of $800
million remained undrawn.
Share Buybacks
On 21 September 2022, HVPE announced it had begun purchasing its
own shares for cancellation. For more information, please refer to
page 4 of the Chair's Statement and Note 12 of the Financial
Statements on page 42.
As at 26 October, the total number of shares in issue was
79,104,622 shares, a decrease of 757,864 from the 79,862,486 shares
in issue at 31 July 2022.
Share Price Since 31 July 2022
Like most major public equity indices [13] , HVPE's share price
has declined since 31 July 2022, driven by the continued war in
Ukraine, rising interest rates, surging inflation, and wider macro
concerns. The closing price of GBP22.20 on 21 October 2022
represents a fall of 7.9% since period end. This compares to the
FTSE AW TR index's fall of 10% in US dollars over the same
period.
The market capitalisation of the Company as at 21 October 2022
was GBP1.8 billion and, as of the same date, HVPE was ranked 65th
in the FTSE 250 (22 October 2021: 93rd).
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 2022 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 12.
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 2022 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 and
decline in public markets and subdued activity in private markets.
The Company's cash flows have therefore been tracking roughly the
Low scenario considered at the start of the year. In considering
Going Concern for the required one-year period for these 2022
Semi-Annual Report and Accounts, the Directors therefore primarily
focused on two modelled scenarios: the 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 noted in the
Chair's Statement on pages 3 to 5. As the balance sheet and new
commitments of the Company continue to grow, the credit facility
was increased by $100 million subsequent 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
The Board has performed a robust assessment of principal risks
(refer to page 12 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 2023,
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 12 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 2023. The Board primarily focused on
the Low Case and the Extreme Downside Case, as noted above. The Low
Case was considered a plausible scenario given the current economic
environment, decreases in public markets and other macro-economic
concerns. While the 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 2023; 1) a credit crisis resulting in all of the
fund-level bridging leverage being called at once assuming that the
underlying HarbourVest fund credit facilities could not be renewed,
2) despite this credit crisis capital calls are still being
received at recent levels (i.e. no decline in the level of capital
calls as seen during the Global Financial Crisis ("GFC")), 3) asset
value declines that are worse than what was experienced during the
GFC, and 4) distribution levels falling to levels not experienced
since the GFC. The Board does not believe the Extreme Downside Case
is a likely scenario, but factors this into the going concern
assessment and takes comfort in knowing that HVPE could survive
such a dire scenario. The results of these model scenarios showed
that the Company would be able to withstand the impact of these
scenarios occurring to 31 December 2023, 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 2023,
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, Steven Wilderspin and Peter Wilson, 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 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 2022 Annual Report and Accounts that
could do so.
By order of the Board
26 October 2022
INTERIM FINANCIAL STATEMENTS
Unaudited Condensed Interim Consolidated Statements of Assets
and Liabilities
At 31 July and 31 January 202 2
31 July 2022 31 January 2022
(Unaudited) (Audited)
In US Dollars (in thousands*) (in thousands*)
-------------------------------------------------------------------------- ---------------- -----------------
Assets
Investments (Note 4) 3,537,453 3,633,361
Cash and equivalents 272,331 284,023
Other assets 6,530 7,865
------------------------------------------------------------------------------ ---------------- -----------------
Total assets 3,816,314 3,925,249
Liabilities
Accounts payable and accrued expenses 1,862 3,280
Accounts payable to HarbourVest Advisers L.P. (Note 9) 37 36
------------------------------------------------------------------------------ ---------------- -----------------
Total liabilities 1,899 3,316
Commitments (Note 5)
Net assets $3,814,415 $3,921,933
Net assets consist of
Shares, unlimited shares authorised, 79,862,486 shares issued and outstanding
at 31 July and
31 January 2022, no par value 3,814,415 3,921,933
------------------------------------------------------------------------------ ---------------- -----------------
Net assets $3,814,415 $3,921,933
Net asset value per share $47.76 $49.11
------------------------------------------------------------------------------ ---------------- -----------------
* 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 28 to 42 were approved by the Board on 26
October 2022 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 202 2 and 202 1
31 July 2022 31 July 2021
In US Dollars (in thousands) (in thousands)
---------------------------------------------------------------- --------------- ---------------
Realised and unrealised (losses) gains on investments
Net realised gain on investments 119,089 251,968
Net change in unrealised appreciation on investments (219,727) 405,736
-------------------------------------------------------------------- --------------- ---------------
Net (loss) gain on investments (100,638) 657,704
Investment income
Interest and dividends from cash and equivalents 646 5
Expenses
Non-utilisation fees (Note 6) 3,436 2,361
Financing expenses 1,279 729
Investment services (Note 3) 1,121 1,297
Professional fees 531 384
Management fees (Note 3) 319 378
Directors' fees and expenses (Note 9) 236 276
Marketing expenses 211 133
Interest expense (Note 6) - 1,583
Other expenses 393 355
-------------------------------------------------------------------- --------------- ---------------
Total expenses 7,526 7,496
-------------------------------------------------------------------- --------------- ---------------
Net investment loss (6,880) (7,491)
-------------------------------------------------------------------- --------------- ---------------
Net (decrease) increase in net assets resulting from operations $(107,518) $650,213
-------------------------------------------------------------------- --------------- ---------------
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 2022 and 2021
31 July 2022 31 July 2021
In US Dollars (in thousands) (in thousands)
---------------------------------------------------------------- --------------- ---------------
Increase (decrease) in net assets from operations
Net realised gain on investments 119,089 251,968
Net change in unrealised appreciation (219,727) 405,736
Net investment loss (6,880) (7,491)
-------------------------------------------------------------------- --------------- ---------------
Net (decrease) increase in net assets resulting from operations (107,518) 650,213
Net assets at beginning of period 3,921,933 2,872,511
-------------------------------------------------------------------- --------------- ---------------
Net assets at end of period $3,814,415 $3,522,724
-------------------------------------------------------------------- --------------- ---------------
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 2022 and 2021
31 July 2022 31 July 2021
In US Dollars (in thousands) (in thousands)
----------------------------------------------------------------------------- --------------- ---------------
Cash flows from operating activities
Net (decrease) increase in net assets resulting from operations (107,518) 650,213
Adjustments to reconcile net increase in net assets resulting from operations
to net cash (used in) provided by operating activities:
Net realised gain on investments (119,089) (251,968)
Net change in unrealised appreciation on investments 219,727 (405,736)
Contributions to private equity investments (393,578) (233,640)
Distributions from private equity investments 388,848 294,567
Other (82) 535
--------------------------------------------------------------------------------- --------------- ---------------
Net cash (used in) provided by operating activities (11,692) 53,971
Cash flows from financing activities
Proceeds from borrowing on the credit facility - 80,000
Repayments in respect of the credit facility - (115,000)
--------------------------------------------------------------------------------- --------------- ---------------
Net change in financing activities - (35,000)
--------------------------------------------------------------------------------- --------------- ---------------
Net change in cash and equivalents (11,692) 18,971
Cash and equivalents at beginning of period 284,023 98,416
--------------------------------------------------------------------------------- --------------- ---------------
Cash and equivalents at end of period $272,331 $117,387
--------------------------------------------------------------------------------- --------------- ---------------
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 2022
In US Dollars
Unfunded Amount Distributions Fair Value
Commitment Invested* Received Fair Value as a % of
US Funds (in thousands) (in thousands) (in thousands) (in thousands) Net Assets
------------------------------- -------------- -------------- -------------- -------------- ----------
HarbourVest Partners
V-Partnership Fund L.P. 2,220 46,709 45,924 906 0.0
-------------------------------- -------------- -------------- -------------- -------------- ----------
HarbourVest Partners VI-Direct
Fund L.P. 1,313 46,722 40,882 604 0.0
-------------------------------- -------------- -------------- -------------- -------------- ----------
HarbourVest Partners
VI-Partnership Fund L.P. 5,175 204,623 237,227 718 0.0
-------------------------------- -------------- -------------- -------------- -------------- ----------
HarbourVest Partners VII-Venture
Partnership Fund L.P. 2,319 135,290 203,839 3,279 0.1
-------------------------------- -------------- -------------- -------------- -------------- ----------
HarbourVest Partners VII-Buyout
Partnership Fund L.P. 3,850 74,417 103,486 182 0.0
-------------------------------- -------------- -------------- -------------- -------------- ----------
HarbourVest Partners VIII-Cayman
Mezzanine and Distressed Debt
Fund L.P. 2,000 48,202 61,472 3,409 0.1
-------------------------------- -------------- -------------- -------------- -------------- ----------
HarbourVest Partners VIII-Cayman
Buyout Fund L.P. 7,500 245,259 392,851 35,546 0.9
-------------------------------- -------------- -------------- -------------- -------------- ----------
HarbourVest Partners VIII-Cayman
Venture Fund L.P. 1,000 49,192 86,210 20,522 0.5
-------------------------------- -------------- -------------- -------------- -------------- ----------
HarbourVest Partners 2007 Cayman
Direct Fund L.P. 2,250 97,877 160,808 4,493 0.1
-------------------------------- -------------- -------------- -------------- -------------- ----------
HarbourVest Partners IX-Cayman
Buyout Fund L.P. 10,473 60,808 77,967 56,492 1.5
-------------------------------- -------------- -------------- -------------- -------------- ----------
HarbourVest Partners IX-Cayman
Credit Opportunities Fund L.P. 2,500 10,049 10,484 6,770 0.2
-------------------------------- -------------- -------------- -------------- -------------- ----------
HarbourVest Partners IX-Cayman
Venture Fund L.P. 3,500 66,826 117,247 111,298 2.9
-------------------------------- -------------- -------------- -------------- -------------- ----------
HarbourVest Partners 2013 Cayman
Direct Fund L.P. 3,229 97,131 139,884 64,225 1.7
-------------------------------- -------------- -------------- -------------- -------------- ----------
HarbourVest Partners Cayman
Cleantech Fund II L.P. 1,600 18,456 13,994 21,346 0.6
-------------------------------- -------------- -------------- -------------- -------------- ----------
HarbourVest Partners X Buyout
Feeder Fund L.P. 57,960 194,068 128,916 222,018 5.8
-------------------------------- -------------- -------------- -------------- -------------- ----------
HarbourVest Partners X Venture
Feeder Fund L.P. 7,770 140,284 87,233 304,238 8.0
-------------------------------- -------------- -------------- -------------- -------------- ----------
HarbourVest Partners Mezzanine
Income Fund L.P. 8,155 42,067 62,049 17,455 0.5
-------------------------------- -------------- -------------- -------------- -------------- ----------
HarbourVest Partners XI Buyout
Feeder Fund L.P. 166,250 183,750 50,881 250,309 6.6
-------------------------------- -------------- -------------- -------------- -------------- ----------
HarbourVest Partners XI Micro
Buyout Feeder Fund L.P. 29,575 35,425 12,261 49,350 1.3
-------------------------------- -------------- -------------- -------------- -------------- ----------
HarbourVest Partners XI Venture
Feeder Fund L.P. 49,400 140,636 36,881 216,808 5.7
-------------------------------- -------------- -------------- -------------- -------------- ----------
HarbourVest Adelaide Feeder L.P. 6,000 144,000 176,644 3,467 0.1
-------------------------------- -------------- -------------- -------------- -------------- ----------
HarbourVest Partners XII Buyout
Feeder Fund L.P. 495,000 - - 2,601 0.1
-------------------------------- -------------- -------------- -------------- -------------- ----------
HarbourVest Partners XII Micro
Buyout Feeder Fund L.P. 80,000 - - 4 0.0
-------------------------------- -------------- -------------- -------------- -------------- ----------
HarbourVest Partners XII Venture
Feeder Fund L.P. 135,000 - - (189) 0.0
-------------------------------- -------------- -------------- -------------- -------------- ----------
HarbourVest Partners XII Venture
AIF SCSp 102,350 12,725 - 12,468 0.3
-------------------------------- -------------- -------------- -------------- -------------- ----------
HarbourVest Infrastructure
Income Delaware Parallel
Partnership L.P. - 117,233 - 117,233 3.1
-------------------------------- -------------- -------------- -------------- -------------- ----------
Total US Funds 1,186,388 2,211,748 2,247,141 1,525,551 40.0
-------------------------------- -------------- -------------- -------------- -------------- ----------
Unfunded Amount Distributions Fair Value
Commitment Invested* Received Fair Value as a % of
International/Global Funds (in thousands) (in thousands) (in thousands) (in thousands) Net Assets
------------------------------- -------------- -------------- -------------- -------------- ----------
HarbourVest International
Private Equity Partners
III-Partnership Fund L.P. 3,450 147,729 148,440 408 0.0
-------------------------------- -------------- -------------- -------------- -------------- ----------
HIPEP V-2007 Cayman European
Buyout Companion Fund L.P.(--) 1,455 63,880 84,434 648 0.0
-------------------------------- -------------- -------------- -------------- -------------- ----------
Dover Street VII Cayman L.P. 4,250 83,504 116,029 2,534 0.1
-------------------------------- -------------- -------------- -------------- -------------- ----------
HIPEP VI-Cayman Partnership Fund
L.P.** 5,109 117,845 153,944 80,532 2.1
-------------------------------- -------------- -------------- -------------- -------------- ----------
HIPEP VI-Cayman Asia Pacific
Fund L.P. 2,500 47,687 53,381 29,259 0.8
-------------------------------- -------------- -------------- -------------- -------------- ----------
HIPEP VI-Cayman Emerging Markets
Fund L.P. - 30,059 10,713 25,006 0.7
-------------------------------- -------------- -------------- -------------- -------------- ----------
Dover Street VIII Cayman L.P. 14,400 165,724 248,367 30,133 0.8
-------------------------------- -------------- -------------- -------------- -------------- ----------
HVPE Charlotte Co-Investment
L.P. - 93,894 155,183 8,068 0.2
-------------------------------- -------------- -------------- -------------- -------------- ----------
HarbourVest Global Annual
Private Equity Fund L.P. 11,300 88,701 117,995 92,788 2.4
-------------------------------- -------------- -------------- -------------- -------------- ----------
HIPEP VII Partnership Feeder
Fund L.P. 16,875 108,125 79,977 146,505 3.8
-------------------------------- -------------- -------------- -------------- -------------- ----------
HIPEP VII Asia Pacific Feeder
Fund L.P. 2,100 27,900 15,192 37,402 1.0
-------------------------------- -------------- -------------- -------------- -------------- ----------
HIPEP VII Emerging Markets
Feeder Fund L.P. 3,000 17,000 6,905 22,048 0.6
-------------------------------- -------------- -------------- -------------- -------------- ----------
HIPEP VII Europe Feeder Fund
L.P. 10,300 60,336 51,793 79,671 2.1
-------------------------------- -------------- -------------- -------------- -------------- ----------
HarbourVest Canada Parallel
Growth Fund L.P.(++++) 6,509 18,042 10,922 33,133 0.9
-------------------------------- -------------- -------------- -------------- -------------- ----------
HarbourVest 2015 Global Fund
L.P. 12,000 88,017 90,002 100,932 2.6
-------------------------------- -------------- -------------- -------------- -------------- ----------
HarbourVest 2016 Global AIF L.P. 23,000 77,026 64,575 88,668 2.3
-------------------------------- -------------- -------------- -------------- -------------- ----------
HarbourVest Partners
Co-Investment IV AIF L.P. 7,000 93,000 82,102 87,610 2.3
-------------------------------- -------------- -------------- -------------- -------------- ----------
Dover Street IX Cayman L.P. 15,000 85,000 77,277 73,965 1.9
-------------------------------- -------------- -------------- -------------- -------------- ----------
HarbourVest Real Assets III
Feeder L.P. 3,750 46,250 6,642 51,945 1.4
-------------------------------- -------------- -------------- -------------- -------------- ----------
HarbourVest 2017 Global AIF L.P. 27,500 72,521 46,238 89,039 2.3
-------------------------------- -------------- -------------- -------------- -------------- ----------
HIPEP VIII Partnership AIF L.P. 61,625 108,375 23,555 140,837 3.7
-------------------------------- -------------- -------------- -------------- -------------- ----------
Secondary Overflow Fund III L.P. 26,650 68,110 61,538 71,251 1.9
-------------------------------- -------------- -------------- -------------- -------------- ----------
HarbourVest Asia Pacific VIII
AIF Fund L.P. 8,250 41,756 8,000 50,169 1.3
-------------------------------- -------------- -------------- -------------- -------------- ----------
HarbourVest 2018 Global Feeder
Fund L.P. 19,600 50,400 11,424 75,439 2.0
-------------------------------- -------------- -------------- -------------- -------------- ----------
HarbourVest Partners
Co-Investment V Feeder Fund
L.P. 22,500 77,548 12,004 117,679 3.1
-------------------------------- -------------- -------------- -------------- -------------- ----------
HarbourVest Real Assets IV
Feeder L.P. 27,000 23,000 2,205 27,363 0.7
-------------------------------- -------------- -------------- -------------- -------------- ----------
HarbourVest 2019 Global Feeder
Fund L.P. 45,000 55,007 11,177 79,442 2.1
-------------------------------- -------------- -------------- -------------- -------------- ----------
HarbourVest Credit Opportunities
Fund II L.P. 21,500 28,500 2,334 30,313 0.8
-------------------------------- -------------- -------------- -------------- -------------- ----------
Dover Street X Feeder Fund L.P. 69,375 80,643 25,985 106,187 2.8
-------------------------------- -------------- -------------- -------------- -------------- ----------
Secondary Overflow Fund IV L.P. 61,656 67,750 22,729 76,411 2.0
-------------------------------- -------------- -------------- -------------- -------------- ----------
HIPEP IX Feeder Fund L.P. 436,500 48,508 3,355 66,476 1.7
-------------------------------- -------------- -------------- -------------- -------------- ----------
HarbourVest 2020 Global Feeder
Fund L.P. 19,500 30,501 2,857 35,718 0.9
-------------------------------- -------------- -------------- -------------- -------------- ----------
HarbourVest Partners
Co-Investment VI Feeder Fund
L.P. 106,250 18,756 - 17,869 0.5
-------------------------------- -------------- -------------- -------------- -------------- ----------
HarbourVest Asia Pacific 5
Feeder Fund L.P. 300,000 - - (1,126) 0.0
-------------------------------- -------------- -------------- -------------- -------------- ----------
HarbourVest 2021 Global Feeder
Fund L.P. 135,150 34,901 - 37,230 1.0
-------------------------------- -------------- -------------- -------------- -------------- ----------
HarbourVest 2022 Global Feeder
Fund L.P. 75,000 - - 353 0.0
-------------------------------- -------------- -------------- -------------- -------------- ----------
Total International/Global Funds 1,605,053 2,265,999 1,807,273 2,011,902 52.7
-------------------------------- -------------- -------------- -------------- -------------- ----------
Total Investments $2,791,441 $4,477,747 $4,054,413 $3,537,453 92.7
-------------------------------- -------------- -------------- -------------- -------------- ----------
* 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 2022, the cost basis of partnership investments is
$2,154,321,000.
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 2022 (audited)
In US Dollars
Unfunded Amount Distributions Fair Value
Commitment Invested* Received Fair Value as a % of
US Funds (in thousands) (in thousands) (in thousands) (in thousands) Net Assets
------------------------------- -------------- -------------- -------------- -------------- ----------
HarbourVest Partners
V-Partnership Fund L.P. 2,220 46,709 45,924 915 0.0
-------------------------------- -------------- -------------- -------------- -------------- ----------
HarbourVest Partners VI-Direct
Fund L.P. 1,313 46,722 38,405 3,705 0.1
-------------------------------- -------------- -------------- -------------- -------------- ----------
HarbourVest Partners
VI-Partnership Fund L.P. 5,175 204,623 237,227 786 0.0
-------------------------------- -------------- -------------- -------------- -------------- ----------
HarbourVest Partners VII-Venture
Partnership Fund L.P. 2,319 135,290 203,839 3,673 0.1
-------------------------------- -------------- -------------- -------------- -------------- ----------
HarbourVest Partners VII-Buyout
Partnership Fund L.P. 3,850 74,417 103,486 184 0.0
-------------------------------- -------------- -------------- -------------- -------------- ----------
HarbourVest Partners VIII-Cayman
Mezzanine and Distressed Debt
Fund L.P. 2,000 48,202 60,766 4,080 0.1
-------------------------------- -------------- -------------- -------------- -------------- ----------
HarbourVest Partners VIII-Cayman
Buyout Fund L.P. 7,500 245,259 392,851 33,469 0.9
-------------------------------- -------------- -------------- -------------- -------------- ----------
HarbourVest Partners VIII-Cayman
Venture Fund L.P. 1,000 49,192 84,940 24,875 0.6
-------------------------------- -------------- -------------- -------------- -------------- ----------
HarbourVest Partners 2007 Cayman
Direct Fund L.P. 2,250 97,877 160,808 5,257 0.1
-------------------------------- -------------- -------------- -------------- -------------- ----------
HarbourVest Partners IX-Cayman
Buyout Fund L.P. 10,473 60,808 73,709 61,575 1.6
-------------------------------- -------------- -------------- -------------- -------------- ----------
HarbourVest Partners IX-Cayman
Credit Opportunities Fund L.P. 2,500 10,049 9,245 7,690 0.2
-------------------------------- -------------- -------------- -------------- -------------- ----------
HarbourVest Partners IX-Cayman
Venture Fund L.P. 3,500 66,826 114,259 130,115 3.3
-------------------------------- -------------- -------------- -------------- -------------- ----------
HarbourVest Partners 2013 Cayman
Direct Fund L.P. 3,229 97,131 139,036 65,939 1.7
-------------------------------- -------------- -------------- -------------- -------------- ----------
HarbourVest Partners Cayman
Cleantech Fund II L.P. 2,000 18,056 11,083 26,972 0.7
-------------------------------- -------------- -------------- -------------- -------------- ----------
HarbourVest Partners X Buyout
Feeder Fund L.P. 65,520 186,508 118,114 224,411 5.7
-------------------------------- -------------- -------------- -------------- -------------- ----------
HarbourVest Partners X Venture
Feeder Fund L.P. 10,730 137,324 76,438 338,753 8.6
-------------------------------- -------------- -------------- -------------- -------------- ----------
HarbourVest Partners Mezzanine
Income Fund L.P. 8,155 42,067 61,619 15,931 0.4
-------------------------------- -------------- -------------- -------------- -------------- ----------
HarbourVest Partners XI Buyout
Feeder Fund L.P. 203,000 147,000 37,599 213,870 5.5
-------------------------------- -------------- -------------- -------------- -------------- ----------
HarbourVest Partners XI Micro
Buyout Feeder Fund L.P. 38,025 26,975 8,556 38,292 1.0
-------------------------------- -------------- -------------- -------------- -------------- ----------
HarbourVest Partners XI Venture
Feeder Fund L.P. 71,250 118,786 20,538 211,899 5.4
-------------------------------- -------------- -------------- -------------- -------------- ----------
HarbourVest Adelaide Feeder L.P. 6,000 144,000 5,339 174,714 4.5
-------------------------------- -------------- -------------- -------------- -------------- ----------
Total US Funds 877,008 2,003,821 2,003,781 1,588,985 40.5
-------------------------------- -------------- -------------- -------------- -------------- ----------
Unfunded Amount Distributions Fair Value
Commitment Invested* Received Fair Value as a % of
International/Global Funds (in thousands) (in thousands) (in thousands) (in thousands) Net Assets
------------------------------- -------------- -------------- -------------- -------------- ----------
HarbourVest International
Private Equity Partners
III-Partnership Fund L.P. 3,450 147,729 148,440 457 0.0
-------------------------------- -------------- -------------- -------------- -------------- ----------
HarbourVest International
Private Equity Partners
IV-Direct Fund L.P. - 61,452 53,436 1,635 0.0
-------------------------------- -------------- -------------- -------------- -------------- ----------
HIPEP V-2007 Cayman European
Buyout Companion Fund L.P.(--) 1,599 63,880 84,434 715 0.0
-------------------------------- -------------- -------------- -------------- -------------- ----------
Dover Street VII Cayman L.P. 4,250 95,586 132,298 3,195 0.1
-------------------------------- -------------- -------------- -------------- -------------- ----------
HIPEP VI-Cayman Partnership Fund
L.P.** 5,618 117,845 144,955 100,544 2.6
-------------------------------- -------------- -------------- -------------- -------------- ----------
HIPEP VI-Cayman Asia Pacific
Fund L.P. 2,500 47,687 50,367 34,028 0.9
-------------------------------- -------------- -------------- -------------- -------------- ----------
HIPEP VI-Cayman Emerging Markets
Fund L.P. - 30,059 10,713 33,221 0.8
-------------------------------- -------------- -------------- -------------- -------------- ----------
HVPE Avalon Co-Investment L.P. - 85,135 124,574 - -
-------------------------------- -------------- -------------- -------------- -------------- ----------
Dover Street VIII Cayman L.P. 14,400 165,724 244,188 34,995 0.9
-------------------------------- -------------- -------------- -------------- -------------- ----------
HVPE Charlotte Co-Investment
L.P. - 93,894 154,205 8,485 0.2
-------------------------------- -------------- -------------- -------------- -------------- ----------
HarbourVest Global Annual
Private Equity Fund L.P. 11,300 88,701 107,487 110,988 2.8
-------------------------------- -------------- -------------- -------------- -------------- ----------
HIPEP VII Partnership Feeder
Fund L.P. 19,063 105,938 65,503 171,243 4.4
-------------------------------- -------------- -------------- -------------- -------------- ----------
HIPEP VII Asia Pacific Feeder
Fund L.P. 2,100 27,900 13,111 40,662 1.0
-------------------------------- -------------- -------------- -------------- -------------- ----------
HIPEP VII Emerging Markets
Feeder Fund L.P. 3,000 17,000 6,245 23,625 0.6
-------------------------------- -------------- -------------- -------------- -------------- ----------
HIPEP VII Europe Feeder Fund
L.P. 12,034 59,661 43,554 96,083 2.4
-------------------------------- -------------- -------------- -------------- -------------- ----------
HarbourVest Canada Parallel
Growth Fund L.P.(++++) 6,650 17,957 10,765 34,991 0.9
-------------------------------- -------------- -------------- -------------- -------------- ----------
HarbourVest 2015 Global Fund
L.P. 15,000 85,017 75,574 112,362 2.9
-------------------------------- -------------- -------------- -------------- -------------- ----------
HarbourVest 2016 Global AIF L.P. 24,000 76,026 51,143 104,956 2.7
-------------------------------- -------------- -------------- -------------- -------------- ----------
HarbourVest Partners
Co-Investment IV AIF L.P. 7,000 93,000 82,102 108,069 2.8
-------------------------------- -------------- -------------- -------------- -------------- ----------
Dover Street IX Cayman L.P. 17,000 83,000 71,318 78,623 2.0
-------------------------------- -------------- -------------- -------------- -------------- ----------
HarbourVest Real Assets III
Feeder L.P. 3,750 46,250 6,642 47,889 1.2
-------------------------------- -------------- -------------- -------------- -------------- ----------
HarbourVest 2017 Global AIF L.P. 28,500 71,521 39,881 98,300 2.5
-------------------------------- -------------- -------------- -------------- -------------- ----------
HIPEP VIII Partnership AIF L.P. 85,425 84,575 16,964 128,778 3.3
-------------------------------- -------------- -------------- -------------- -------------- ----------
Secondary Overflow Fund III L.P. 27,025 67,735 57,423 77,769 2.0
-------------------------------- -------------- -------------- -------------- -------------- ----------
HarbourVest Asia Pacific VIII
AIF Fund L.P. 13,750 36,256 4,275 46,613 1.2
-------------------------------- -------------- -------------- -------------- -------------- ----------
HarbourVest 2018 Global Feeder
Fund L.P. 24,500 45,500 8,442 71,101 1.8
-------------------------------- -------------- -------------- -------------- -------------- ----------
HarbourVest Partners
Co-Investment V Feeder Fund
L.P. 22,500 77,548 5,192 125,936 3.2
-------------------------------- -------------- -------------- -------------- -------------- ----------
HarbourVest Real Assets IV
Feeder L.P. 38,250 11,750 463 16,204 0.4
-------------------------------- -------------- -------------- -------------- -------------- ----------
HarbourVest 2019 Global Feeder
Fund L.P. 49,000 51,007 7,717 78,060 2.0
-------------------------------- -------------- -------------- -------------- -------------- ----------
HarbourVest Credit Opportunities
Fund II L.P. 28,500 21,500 1,134 23,786 0.6
-------------------------------- -------------- -------------- -------------- -------------- ----------
Dover Street X Feeder Fund L.P. 87,000 63,018 17,592 89,841 2.3
-------------------------------- -------------- -------------- -------------- -------------- ----------
Secondary Overflow Fund IV L.P. 52,792 52,055 16,700 63,675 1.6
-------------------------------- -------------- -------------- -------------- -------------- ----------
HIPEP IX Feeder Fund L.P. 470,450 14,558 - 37,440 1.0
-------------------------------- -------------- -------------- -------------- -------------- ----------
HarbourVest 2020 Global Feeder
Fund L.P. 30,250 19,751 1,342 26,175 0.7
-------------------------------- -------------- -------------- -------------- -------------- ----------
H arbourVest Partners
Co-Investment VI Feeder Fund
L.P. 100,000 - - 107 0.0
-------------------------------- -------------- -------------- -------------- -------------- ----------
HarbourVest Asia Pacific 5
Feeder Fund L.P. 210,000 - - (1,166) (0.0)
-------------------------------- -------------- -------------- -------------- -------------- ----------
HarbourVest 2021 Global Feeder
Fund L.P. 157,250 12,801 - 14,990 0.4
-------------------------------- -------------- -------------- -------------- -------------- ----------
Total International/Global Funds 1,577,906 2,239,018 1,858,181 2,044,376 52.1
-------------------------------- -------------- -------------- -------------- -------------- ----------
Total Investments $2,454,914 $4,242,839 $3,861,962 $3,633,361 92.6
-------------------------------- -------------- -------------- -------------- -------------- ----------
* 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 2022, the cost basis of partnership investments
is $2,030,502,000.
Totals and subtotals may not recalculate due to rounding.
The accompanying notes are an integral part of the Unaudited
Condensed Interim Consolidated Financial Statements.
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 is intended 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 2022, the Company's 79,862,486 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.
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
("BNPP") as Company Secretary and Administrator. Fees for these
services are paid as invoiced by BNPP 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 2022 and 2021, fees of $77,708 and $93,396, respectively,
were payable to BNPP 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 2022 and
2021, registrar fees of $9,570 and $15,254, 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 2022 and 2021, auditor fees of
$214,000 and $196,000 were accrued, respectively, and are included
in professional fees in the Unaudited Condensed Interim
Consolidated Statements of Operations. The 31 July 2022 and 2021
figures include $116,000 and $102,000, respectively, which
represents approximately half of each period's respective annual
audit fee. The 31 July 2022 and 2021 figures also include $4,000
and $3,000, respectively, related to the prior financial year's
audit fee. In addition, the 31 July 2022 and 2021 figures include
fees of $94,000 and $90,000, 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 2022 and 2021.
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 2022 and 2021, reimbursements for services provided
by the Investment Manager were $1,121,000 and $1,297,000,
respectively. As of 01 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, HVPE is charged the same management fees as other
significant investors in the HarbourVest funds, and is subject to
the same performance allocations.
During the periods ended 31 July 2022 and 2021, 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 2022 and 2021.
Management fees included in the Unaudited Condensed Interim
Consolidated Statements of Operations are shown in the table
below:
2022 2021
(in thousands) (in thousands)
---------------------------------- --------------- ---------------
HVPE Charlotte Co-Investment L.P. $319 $378
-------------------------------------- --------------- ---------------
For the periods ended 31 July 2022 and 2021, management fees on
the HVPE Charlotte Co-Investment L.P. investment were calculated
based on a weighted average effective annual rate of 0.37% on
capital originally committed (0.37% on committed capital 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 2022 and 2021, the Company made
contributions of $393,578,000 (including contributions in kind of
$117,233,000) and $233,640,000, respectively, to Level 3
investments and received distributions of $388,848,000 (including
distributions in kind of $117,233,000) and $294,567,000,
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 2022, $3,537,453,000 of the Company's investments are
classified as Level 3. As of 31 January 2022, $3,633,361,000 of the
Company's investments were classified as Level 3.
Note 5 Commitments
As of 31 July 2022, the Company had unfunded investment
commitments to other limited partnerships of $2,791,441,000 which
are payable upon notice by the partnerships to which the
commitments have been made. As of 31 January 2022, the Company had
unfunded investment commitments to other limited partnerships of
$2,454,914,000.
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, 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 $2.7 million at 31 July 2022
and $3.5 million at 31 July 2021, 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 2022 and 2021, the Company had an agreement with
Mitsubishi UFJ Trust and Banking Corporation, New York Branch
("MUFG") and Credit Suisse AG, London Branch ("Credit Suisse") 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.
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. Availability of funds
under the Facility and interim repayments of amounts borrowed are
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 2022 and 31 January 2022, there was no debt outstanding
against the Facility. For the periods ended 31 July 2022 and 2021,
interest of $0 and $1,583,000, respectively, was incurred and is
included as other expenses in the Unaudited Condensed Interim
Consolidated Statements of Operations. Included in other assets at
31 July 2022 and 31 January 2022 are deferred financing costs of
$6,078,000 and $7,357,000, 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 2022 and 2021, $3,436,000 and $2,361,000,
respectively, in non-utilisation fees have been incurred.
Note 7 Financial Highlights
For the Six-month Periods Ended 31 July 2022 and 2021
In US Dollars 2022 (Unaudited) 2021 (Unaudited)
------------------------------------------- ---------------- ----------------
Shares
Per share operating performance:
Net asset value, beginning of period $49.11 $35.97
Net realised and unrealised (losses) gains (1.26) 8.23
Net investment losses (0.09) (0.09)
-------------------------------------------- ---------------- ----------------
Total from investment operations (1.35) 8.14
Net asset value, end of period $47.76 $44.11
Market value, end of period $29.00* $31.50*
Total return at net asset value (2.7)% 22.6%
Total return at market value (22.3)% 23.3%
-------------------------------------------- ---------------- ----------------
Ratios to average net assets
Expenses 0.19% 0.23%
Net investment loss (0.18)% (0.23)%
-------------------------------------------- ---------------- ----------------
* 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 net asset value ("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 net asset value 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 payable to HarbourVest Advisers L.P. of $37,000
and $36,000 represent expenses of the Company incurred in the
ordinary course of business, which have been paid by and are
reimbursable to HarbourVest Advisers L.P. at 31 July 2022 and 31
January 2022, respectively.
Board-related expenses, primarily compensation, of $236,000 and
$276,000 were incurred during the periods ended 31 July 2022 and
2021, respectively.
Note 10 INVESTMENT TRANSACTION
On July 1, 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 July 1, 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 2022 to 26 October 2022, the date that the Financial
Statements were issued.
On 15 August 2022, the multi- currency revolving credit facility
of $700 million was increased by $100 million with a new lender,
New Zealand Superannuation Fund. The initial term of the $100
million extension is five years, with the potential to extend this.
The total size of the facility is now $800 million, with three
different lenders.
The Company made the following purchases of its ordinary shares
for cancellation:
Date Number of Shares Amount Purchased (GBP)
------------------ ---------------- ----------------------
20 September 2022 82,821 1,750,588
------------------ ---------------- ----------------------
22 September 2022 107,439 2,392,418
------------------ ---------------- ----------------------
23 September 2022 154,104 3,440,955
------------------ ---------------- ----------------------
26 September 2022 10,613 239,644
------------------ ---------------- ----------------------
27 September 2022 62,887 1,449,541
------------------ ---------------- ----------------------
28 September 2022 170,000 3,911,242
------------------ ---------------- ----------------------
29 September 2022 170,000 3,828,648
------------------ ---------------- ----------------------
There were no other events or material transactions subsequent
to 31 July 2022 that required recognition or disclosure in the
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 13,000 individual companies in the HVPE portfolio, with no
one company comprising more than 2.4% 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 2022 NAV is based on the 30 June 2022 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 2022. 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 39 to 40.
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. 12% of
underlying partnership holdings are denominated in euros. The
euro-denominated Investment Pipeline is EUR16.5 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.
-- 0.5% of underlying partnership holdings are denominated in Canadian dollars. The Canadian dollar-denominated Investment Pipeline is C$8.3 million.
-- 0.3% of underlying partnership holdings are denominated in Swiss francs. There is no Swiss franc-denominated Investment Pipeline.
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.
[1] 'InfRA' incorporates infrastructure and real assets.
[2] The peer group refers to the UK listed private equity fund
of funds: BMO Private Equity Trust, ICG Enterprise Trust, JPEL
Private Equity, Pantheon International Plc, and Standard Life
Private Equity.
[3] "Pitchbook Q2 2022 US PE Breakdown" and "Pitchbook Q2 2022
European PE Breakdown", July 2022.
[4] "Pitchbook Q2 2022 US PE Breakdown", July 2022.
[5] These include five 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.
[6] Realised and unrealised gains are shown net of management
fees, performance fees, and foreign currency in the Unaudited
Condensed Interim Consolidated Statements of Operations.
[7] Realised gain/value changes from the balance of 54 other
HarbourVest funds and 17 secondary co-investments in the Investment
Portfolio.
[8] Management fees include management fees from HarbourVest
Funds and secondary co-investments as shown in the Unaudited
Condensed Interim Consolidated Statements of Operations
($319k).
[9] Please refer to page 10 for more information on the
performance fees.
[10] Operating expenses exclude management fees ($319k) and are
shown net of interest income ($646k).
[11] As measured since the announcement of the transaction or
IPO filing.
[12] Diversification by stage, phase, strategy, currency, and
geography is based on the estimated net asset value 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.
[13] Public market comparisons include S&P 500, FTSE 250,
Dow Jones, Stoxx50, Nikkei 225, and Hang Seng indices.
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