Harbourvest Global Private Equity, a $1081m fund which is offering the investors exposure to many unquoted businesses located globally, could benefit from the surge of buying as it enters FTSE All Share index.
Structure of the fund is the same as a company, and its shares are listed on London Stock Exchange since 2010.
Previously it was categorized as “specialist fund.” However, its reclassification as investment company within “main market” of LSE took place on 9th September. What this means is that on the 2nd of December, next point of FTSE indices’ quarterly reshuffle, it’s going to become a part of All Share index. And it might even fall in FTSE 25, which is that part of index which comprises the 101 to 350 biggest companies. But it depends on if it is elbowed out first by other, bigger new entrants. Inclusion of the new companies in All Share normally sparks increase in buying, as the tracker funds are obliged to take holding.
If everything remains the same, it must cause the prices of Harbourvest to rise. The investments of Harbourvest are in 30 portfolios, having stakes in 6800 businesses that are privately owned.
It provides a very diversified exposure to the private equity, a sector which provides opportunities for fabulous gains, but a risky one. Harbourvest previously had stakes in Facebook before its high profile flotation and the original holding of Harbourvest in Facebook increased about 300 times.
Harbourvest also profited a great deal from the pre-flotation stakes in Alibaba and Twitter.
Harbourvest’s high profile holdings, which remain private, today include the shares in taxi service Uber. Uber is highly controversial taxi service which undercuts the traditional taxis on the streets. The total value of Uber is about $50 billion.
Another holding which is not yet listed is in the picture sharing app Snapchat. Its current value is more than $60 billion. The underlying value of Harbourvest – total value of all the holdings of Harbouvest, presently $1.38 billion – today is about 20 percent greater than $1.08 billion market value according to share price of the company.
This 20 percent discount makes funds attractive – and should narrow if the buying picks up after its joining with All Share.
A note was issued by Broker Jefferies – when the discount of Harbourvest was narrower than 16 percent – highlighting that proposed listing on the main market offers potential catalyst for narrowing of the discount to the level that will reflect its strength better. Harbourvest was marked as a buy by Broker Jefferies.
Winterflood, a rival broker, is also quite upbeat. They noted that average discounts for the private equity funds that are listed was 17 percent at the end of September, and they believed that it presented a good opportunity.
They further said that in particular they would highlight funds like NB Private Equity, Harbourvest Private Equity and Standard Life European Private Equity. The Harbourvest Global Private Equity is already owned by the other funds who are looking for profits from the undervalued assets, including the British Empire Trust.