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Trust Insider: why it's worth going continental for PE exposure
by James Carthew on Feb 18, 2014 at 00:01
Following my piece on Graphite last week, I promised I would write something about the other funds that presented at our listed private equity conference.
I wrote about JZ Capital in August 2012 and went into the story pretty thoroughly so there is not much point rehashing that for you, though it probably is worth mentioning that since then, JZ Capital’s discount has come in from well over 40% to a little over 25%.
The shares are up almost 30% and the substantial liquidity JZ Capital had then has been deployed into some interesting new businesses. I am surprised its discount is not even narrower given its yield but it is still a complex beast.
The other two funds, Private Equity Holding and Altamir, are technically slightly off-topic for this column as the first is listed in Zurich and the second in Paris. I think though that these funds are interesting and it is probably worth bringing them to your attention.
A Swiss twist
Private Equity Holding (PEH) is a fund of private equity funds managed by Alpha Associates from Zurich.
The fund listed in 1999 but quickly developed an over-commitment problem. In 2003, Alpha was brought in to sort out the mess and get the fund back on track. The performance record since 2004 is Alpha’s (NAV up 113%) and is all the better since the lessons of the early 2000s meant it did not have a liquidity problem in the credit crunch (PEH is currently 10.5% overcommitted, which is quite conservative).
Alpha is also the largest shareholder in the fund with circa 20% of the equity so has a big vested interest in making it perform.
Although the main focus is on investing in LPs, PEH does have some co-investments in direct private equity holdings. Another distinguishing feature is a significant weighting towards investments in Russia and Central & Eastern Europe, about 12% of the portfolio at the end of 2013.
The balance of the fund is split roughly equally between US and Europe, with just 4% elsewhere. To try to keep the discount down, the fund is making regular annual distributions, CHF2.25 (£1.53) per share in 2013, and is currently buying back shares.
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