30
May 2024
RESULTS FOR THE 12 MONTHS
ENDED 31 JANUARY 2024
Long-term outperformance
continues
Private equity market
conditions forecast to improve
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 audited results for the 12 months
ended 31 January 2024.
Highlights
Resilient net asset value ("NAV")
performance
· NAV
per share growth of 4.0% over the period to $50.47 (31 January
2023: $48.52).
· Exits
continued at a 24% premium to carrying value,1 as
M&A activity increased during the year.
· Over
the financial year, HVPE was a net investor by $283 million cash
invested.
Consistent long-term outperformance of public market
benchmarks
· Over
the 10 years to 31 January 2024, HVPE delivered growth in NAV per
share of 251%, while the FTSE All-World Total Return (FTSE AW TR)
Index returned 138% (USD).
· NAV
per share has doubled over the five years to 31 January 2024 and is
more than five times its level at the IPO in December
2007.
Private equity markets forecast to improve
· Positive shift in the macroeconomic environment as public
markets began to recover with an expectation that private markets
will follow.
· Improvements in investment environment seen in Q4 2023 have
continued into 2024.
· M&A activity recovering, with exits post period end ahead
of the last 12-month average.
Distribution Pool allocation expected to be $150 - $250
million
· Distribution Pool initiated 1 February 2024, ring fencing
capital to be deployed for share buybacks or special
dividends.
· The
Board expects that the total amount of cash allocated to the
Distribution Pool across the two calendar years 2024 and 2025 will
be between $150 million and $250 million, inclusive of a seed
amount during 2024 of $75 million.
· The
current balance in the Distribution Pool is $52 million, which will
be used for further share buybacks.
· 1.4
million shares repurchased in 12 months to 31 January 2024. Share
buybacks began in September 2022 with 2.9 million shares having
been repurchased for a total consideration of £64.7 million adding
$0.86 to NAV per share over the period.
Ed
Warner, Chair of HVPE, said:
"The investment case for HVPE
remains compelling. The Company has outperformed public equity
markets over the past ten years, and we are optimistic that this
will continue in the long term.
HVPE's track record attests to the
resilience of its investment strategy during challenging periods,
and its diversified portfolio is well-positioned to continue to
deliver strong returns and outperformance in the years
ahead.
HVPE's near term prospects also
appear favourable. IPOs and M&A transactions are both rising.
Concerns about valuations in the sector are also alleviating, which
should help to drive both exit volumes and premiums.
The progress we have made over the
year, including actions we have taken to drive share price returns,
positions us well for the future. With private market recovery
gathering momentum the Board is confident HVPE is well set
for future growth."
Annual Report and Accounts
To view the Company's 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 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
Investor Meet Company Webinar
There will be a presentation for
shareholders on Tuesday, 4 June 2024 at 11:00AM GMT.
Investors can sign up to Investor
Meet Company for free and register via:
https://www.investormeetcompany.com/harbourvest-global-private-equity-limited/register-investor
Annual Results Presentation
HVPE will publish a new
presentation on its website to supplement the publication of the
Annual Results for the 12 months ended 31 January 2024. The
presentation will be available to view and download from
www.hvpe.com today.
1
These figures represent the weighted average percentage uplift to
carrying value of 79 individual company M&A and IPO
transactions during the year ended 31 January 2024. This analysis
takes each company's value (whether realised or unrealised) at 31
January 2024 and compares it to the carrying value prior to
announcement of the transaction. This analysis represents 83% of
the total value of transactions in the year ended 31 January 2024
and does not represent the portfolio as a whole. Additionally, it
does not reflect management fees, carried interest, and other
expenses of the HarbourVest funds or the underlying managers, which
will reduce returns. Past performance is not necessarily indicative
of future returns.
- ENDS
-
LEI: 213800NBWV6WWV8TOL46
Enquiries:
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 over
40 years of experience.
About HarbourVest Partners, LLC:
HarbourVest is an independent,
global private markets firm with 40 years of experience and more
than $125 billion of assets under management as of December 31,
2023. Our interwoven platform provides clients access to global
primary funds, secondary transactions, direct co-investments, real
assets and infrastructure, and private credit. Our strengths extend
across strategies, enabled by our team of more than 1,000
employees, including more than 230 investment professionals across
Asia, Europe, and the Americas. Across our private markets
platform, our team has committed more than $58 billion to
newly-formed funds, completed over $50 billion in secondary
purchases, and invested over $37 billion in directly operating
companies. We partner strategically and plan our offerings
innovatively to provide our 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.
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
©
2024 HarbourVest Global Private Equity Limited. All rights
reserved.
Chair's statement
Dear
Shareholder,
There was little respite for
investors during much of 2023, as central banks continued to raise
interest rates through the first half of the year to quash
inflationary pressures. This aggressive monetary tightening made
market participants fearful of a global recession and cautious
about committing to new investments, including in private markets.
Despite these challenges, our diversified portfolio showed
resilience and delivered growth. By early 2024, the mood had
started to brighten as inflation slowed and investors began to
anticipate rate cuts. In both private and public markets, there
were early signs of increased M&A and IPO activity and some
optimism about a better year
ahead.
Resilient financial performance
Against this backdrop, HVPE's net
asset value (NAV) per share rose 4.0% to $50.47 over the year to 31
January 2024. This compares with a 15.3% rise in the FTSE All-World
Total Return Index, led by a surge in US share prices as market
sentiment improved in late 2023. HVPE's relative underperformance
is not surprising, and is consistent with private equity
investments being inherently less volatile than listed markets,
tending to outperform during public market downturns and lagging as
markets start to recover.
Importantly, the Company's
long-term performance remains strong and is the basis of the
Board's belief in our strategy. HVPE has realised its investment
objective to deliver material outperformance of the public markets
throughout the cycle. In the ten years to 31 January 2024, HVPE
delivered growth in NAV per share of 251%, while the FTSE All-World
Total Return Index returned 138% (all USD).
However, the full benefit of this
outperformance is not reflected in the Company's share price, which
has traded at a significant discount to NAV for an extended period.
HVPE's share price rose 4.8% in the year to 31 January 2024, and
was trading at a discount of 42% (slightly below the 44% discount
at the end of the previous year).
I appreciate it is cold comfort to
HVPE shareholders that most investment companies, regardless of
their asset class or investment strategy, have seen very wide
discounts over the past year. High interest rates have increased
the appeal of lower-risk cash and bond investments, and global
investors seeking capital growth have tended to look to the US in
preference to UK-listed equities. Additional unfavourable
influences have ensured that listed private equity companies have
seen discounts wider than most. Technical factors such as
persistent selling by UK-focused index tracker funds, affect HVPE
and some of its immediate peers, due to their inclusion in the FTSE
250 and FTSE All-Share indices. There has also been a degree of
scepticism over reported NAVs for alternative asset classes such as
private equity in this higher interest rate
environment.
As a Board, we remain resolute in
our conviction that HVPE's published NAV figure is robust, being
the result of rigorous valuation processes at each level in its
structure, and reflects the economic value of the Company's
underlying investments. Further reassurance regarding HVPE's NAV is
provided by the fact that, on average, our investments have
continued to be exited at a premium to carrying value.
My fellow Directors and I share
investors' frustration with HVPE's discount. We are all
shareholders ourselves in HVPE and believe the discount is
unjustified given HVPE's meticulous valuation process and the
quality of the funds and companies in which it is
invested.
New distribution policy
In response to this situation, over
the past year we have engaged with a large number of investors and
other stakeholders, to explore how shareholders can participate
more directly in HVPE's NAV growth through the cycle, while also
supporting the share price and potentially reducing the
discount.
As a result of these discussions,
the Board recently announced a new policy, effective from
1 February 2024, which saw the establishment of a Distribution
Pool. This Pool is being funded by a proportion of the cash
realisations from the Company's portfolio going forward, with this
proportion set initially at 15%. This effectively ring-fences
capital to be deployed for share buybacks or special dividends,
while taking into consideration the importance of maintaining
balance sheet strength and liquidity. Several factors are weighed
when determining shareholder distributions, including the
macroeconomic environment, the discount, market sentiment, and any
alternative opportunities. At the current wide discount, the policy
favours share buybacks and we have been active in this regard in
the new financial year.
Full details of this policy are
outlined on page 71.
Buybacks
In the current unusual market
conditions, repurchasing shares represents an attractive and
prudent investment, and makes sense from a capital allocation
perspective. In accordance with our established framework for
assessing buybacks, in May 2023, the Board announced our intention
to buy back $25 million of shares, with a further allocation to
share repurchases being announced in the Semi-Annual Report. In
total, during the 12 months ended 31 January 2024, our brokers
bought back 1,421,114 shares for cancellation at an average price
of £21.70 per share for a total value of £30.8 million ($38.5
million). This added $0.42 to NAV per share over the
year.
Since the year-end, HVPE has
continued buying back shares with a further 714,154 shares
repurchased for cancellation at an average price of £23.67 per
share for a total consideration of £16.9 million ($21.5
million).
Since first buying back shares in
September 2022, the Company has therefore repurchased a total of
2,893,132 shares for consideration of £64.7 million ($78.7
million). This is the equivalent of 3.6% of HVPE's market
capitalisation as at 30 April 2024.
As mentioned above, in February
HVPE announced the introduction of a Distribution Pool, to be
funded by 15% of cash realisations from the portfolio. This is an
evergreen capital allocation policy, designed to be sustainable
through the cycle, and is not impacted by deductions such as
capital calls, debt repayments or fund expenses. Investors are able
to track the growth of the Distribution Pool on a monthly basis,
while the Investment Manager determines forward commitments based
on the remaining 85% of cash distributions.
During this first year of its
operation, the Distribution Pool is being additionally funded by a
seed amount, currently expected to total $75 million. This was
reallocated from a postponed commitment to a HarbourVest fund and
is being contributed in three equal tranches through the year. As
of the date of this report, the balance in the Distribution Pool is
$52 million, which the Board is pleased to confirm will be used for
further share buybacks.
Looking ahead, based on the
detailed modelling carried out by the Investment Manager, we expect
that the total amount of cash allocated to the Distribution Pool
across the two calendar years 2024 and 2025 will be between $150
million and $250 million, inclusive of the existing balance. We
believe that this will make a material difference to shareholders'
returns, helping to ensure that they benefit more directly from the
strong value growth delivered by HVPE's high quality
portfolio.
The potential impact of the
Distribution Pool on the share price discount is difficult to
gauge, but the Board expects that its ongoing operation will have a
supportive effect on total shareholder returns over the long
term.
Balance sheet, portfolio cash flows and
commitments
Over the financial year, HVPE was a
net investor by $283 million. The portfolio reflected the trends
seen across the industry of resilient dealmaking combined with
slower exit activity. While these investments lay the groundwork
for continued strong portfolio performance over the long-term, they
do place a demand on HVPE's cash reserves in the short-term. As at
31 January 2024, HVPE had net debt of $135 million. This was a
change from the prior year position when HVPE had net cash of $198
million. The facility is currently drawn $365 million and HVPE has
a cash balance of $84 million giving a net debt position of $281
million. The Board is conscious of the need to ensure that the
credit facility is always of a size and duration appropriate to
HVPE's needs. The Board intends to refresh the credit facility and
is currently well advanced in this process.
Over the course of 2023, total
commitments were reduced considerably from the original plan,
ending the year at $295 million, in response to the low level of
portfolio exit activity during the year. In November 2023, the
Investment Manager presented a plan for 2024 which was subsequently
approved by the Board. This plan was informed by the Investment
Manager's extensive scenario planning, resulting in the
recommendation of a prudent level of new commitments with a view to
enhancing near-term cash flow. New commitments will continue to be
sized to preserve balance sheet strength and liquidity which
remains an important focus for the Board.
Focus on Environment, Social and Governance
(ESG)
The Board is committed to the
highest standards of corporate governance and to improving the
social and environmental impact of HVPE's activities, in
collaboration with HarbourVest Partners. The Manager presents
frequent updates to the Board on how ESG factors are considered in
its investment process, its screening methods, and its reporting.
This includes a steady increase in the scope and nature of the
information that it can provide on HVPE's own portfolio. In
addition, ESG risk has been integrated into the Board's assessment
of all the material risks faced by the Company to ensure that it is
embedded as a part of HVPE's overall strategy. The Board initiated
a project to calculate its own carbon footprint in 2021 and since
that time, has continued to offset its operational carbon
emissions, the majority of which result from travel. Full details
of the Investment Manager's approach to ESG matters can be found on
pages 68 to 69.
Board and Investment Management
Committee
In response to shareholder
feedback, on 1 February 2024, HVPE announced two refinements to its
corporate governance and investment decision-making structures.
With effect from the July 2024 Annual General Meeting (AGM), HVPE's
Board will become fully independent of the Investment Manager when
HarbourVest Managing Director Carolina Espinal steps down as a
Director. On behalf of the Board, I would like to thank Carolina
for her valuable contribution to the work of the Board over the
past five years.
Carolina will remain involved with
the investment decisions made on behalf of the Company as both she
and Richard Hickman joined HVPE's Investment Committee with effect
from 1 February 2024. In the Board's view, Carolina's and Richard's
close knowledge of the Company and their private market expertise
will strengthen HVPE's investment process, enhancing its ability to
deliver the best possible outcome for shareholders over the long
term.
Given the persistence of a wide
discount, and conscious of the impact this has on shareholders'
returns, the Board has decided that there should be no increase in
the fees paid to Directors for the year ending 31 January
2025.
Marketing and shareholder engagement
The Board is committed to regular
and effective engagement with its stakeholders, to improve
understanding of the Company's strategy and provide updates on
investment activity. As one key element of this process, as in
previous years, HVPE will hold a Capital Markets session for
shareholders on 6 June 2024, at Peel Hunt's offices in London. This
event will be a well-timed opportunity for shareholders to receive
an update on HVPE's results for the year to 31 January 2024, ask
any questions they may have and hear views on global markets and
industry trends from both HarbourVest Partners and external
speakers. My fellow Directors and I look forward to welcoming as
many shareholders as possible in person to this event and we
encourage you to register. Shareholders who are interested in
attending should contact the team at hvpe_events@harbourvest.com.
The Company's AGM with be held in
Guernsey at 1.00PM BST on 17 July 2024. Formal notice will be sent
to registered shareholders shortly and we encourage all registered
shareholders to exercise their votes by proxy.
The Board also undertakes a series
of other activities and events which are outlined on pages 36 to
38. In addition, my fellow Directors and I always welcome the
opportunity to engage with shareholders and answer any questions.
We can be reached via hvpecosec@bnpparibas.com.
Company prospects and outlook
In our view, the investment case
for HVPE remains compelling. The Company has outperformed public
equity markets over the past ten years, and we are optimistic that
this will continue in the long term. HarbourVest is a high quality
manager investing with leading private equity managers, giving it
access to a wealth of talent and high quality opportunities from
around the world. HVPE's track record attests to the resilience of
its investment strategy during challenging periods and, in our
view, its diversified portfolio is well-positioned to continue to
deliver strong returns and outperformance in the years
ahead.
HVPE's near term prospects also
appear favourable, as we share the Manager's view that private
equity markets will improve this year. IPOs and M&A
transactions are both rising, as demonstrated in our recent NAV
updates, and there are widespread expectations that activity will
gain further momentum as the year progresses. The recovery in
public markets is alleviating concerns about valuations, which
should help drive exit volumes. Modest declines in interest rates
should provide a further boost to the sector, as will any
improvement in exit premiums.
This may take time to play out, but
we are confident HVPE is heading in the right direction. The
progress we have made over the year, including actions we have
taken to optimise shareholder returns, will position us well for
the future. We are grateful to those patient shareholders who have
remained invested for the long-term, and to those who have joined
the share register more recently. We thank you for your support and
look forward to reporting back to you on HVPE's further
progress.
Ed
Warner
Chair
29 May 2024
Investment Manager's
report
Introduction
The past year was another
challenging one for investors. Rising interest rates fuelled fears
of a global recession, which sapped investors' confidence.
Geopolitical uncertainties escalated as the war in Ukraine reached
a stalemate, tensions ignited in the Middle East and relations
between the US and China remained fraught. For most of the year,
global equity markets struggled under the weight of these adverse
influences, with the exception of a few US tech stocks perceived to
be the main beneficiaries of the artificial intelligence ("AI")
revolution. However, market sentiment began to improve considerably
in the last quarter of 2023. Tight monetary policy began to take
effect, driving down inflationary pressures, without triggering
recession in most major economies, and equity indices were buoyed
by the prospect of interest rate cuts during 2024.
Private Markets Industry
In private markets, 2023 saw few
IPOs, while mergers and acquisition (M&A) activity was also
limited. This constrained private equity exit activity, which
declined by 24% through to September 2023,1 to its
lowest level in a decade, which in turn limited investors' ability
and appetite to commit to new funds.
On the sell side, many private
equity managers held on to high-quality assets while they waited
for greater clarity on asset valuations. They also delayed
fundraisings and final closes in the face of investor reticence.
Global private markets fundraising declined 36% through to
September 2023,1 with capital more concentrated in the
hands of the larger scale, strongly performing managers. Among
developed markets, the US and Canada held up best, thanks to the
depth of their capital markets, while European markets saw deals
decline in value and size. In the Asia-Pacific region, China's
disappointingly insipid post-pandemic rebound and ongoing property
market problems saw focus shift to other regional markets. Although
India was the only market to see an increase in exits, Australia
and New Zealand saw some sizeable transactions in Q3 of
2023.1
Valuations
These generally subdued market
conditions had an inevitable impact on valuations. The valuations
of venture and growth assets remained under pressure during the
first nine months of the calendar year, although tech-related asset
values began to improve in late 2023 in response to the strong
gains in some listed tech stocks. Overall, NAV held steady over the
year, although premiums to NAV on exit will have been compressed,
as managers felt some urgency to realise investments, even at
slightly lower than desired premiums. Regardless, exits are still
being realised at a healthy premium to carrying value of
24%,2 which should provide confidence in the validity of
our NAV.
However, despite this lacklustre
backdrop, private equity managers still found attractive new
investments and managers with strong track records succeeded in
raising large funds. The sector's top managers continued to perform
well - some of the largest, most successful managers reported
double-digit returns.3 Conditions across the industry
improved in Q4 of 2023 as macroeconomic uncertainties began to
abate and public markets recovered accordingly. There were signs
that IPOs and M&A activity were beginning to recover and
bid-ask spreads, which are the differences between the highest
price a buyer will pay and the lowest price a seller will accept
for an asset, have narrowed.
Strategic Asset Allocation review
Following the 2023 annual review of
HVPE's strategic asset allocation targets, the Board approved the
following changes recommended by the HVPE Investment
Committee:
· At the
Stage level, an increase in the target allocation to Mezzanine and
Infrastructure and Real Assets ("InfRA") from 10% to 15%, reducing
the target Buyout allocation from 60% to 55%. At the end of January
2024, the actual allocation to Mezzanine and InfRA stood at 8%,
while the actual allocation to Buyout stood at 61%. Reaching these
new targets will therefore involve a seven percentage point
increase in allocations to Mezzanine and InfRA and a six percentage
point decline in exposure to Buyouts.
· At the
geographical level, an increase in the target allocation to Europe
from 20% to 24%, reducing the target Asia allocation from 20% to
16%. The actual allocation to Europe already stood at 21% by end
January 2024, while the actual allocation to Asia was
14%.
The increase to Mezzanine and InfRA
is intended to ensure that HVPE benefits from increased exposure to
the attractive risk/reward profile on offer in real assets and
yield-oriented investments. HVPE's infrastructure investments have
performed well through the rising rate environment of the last two
years, while the yields on offer in private credit now range from
10-12% at the senior level to 14-18% for junior
credit.4
The increased target weighting to
Europe reflects the fact that, in our assessment, the private
markets ecosystem in Europe has developed markedly in recent years.
The opportunity set has grown, particularly in the venture and
growth equity market, while returns have been resilient across our
European buyout exposure. Meanwhile in Asia, the investing
environment has seen a marked change due to the scarcity of new
investment opportunities in China. While the country has
historically been a single source of strength for the region based
on the exponential growth of the consumer internet segment during
the prior hype cycle, recent changes have largely closed that
market to North American and European investors, with a 77% decline
in fundraising year-over-year through Q3 of 2023.5
The region is undergoing dramatic shifts that are creating
near-term growth opportunities in other markets like Japan, Korea,
and India.
These new target allocation
weightings are medium to long-term goals, and we will endeavour to
move the portfolio towards these weightings over the next five
years. The next review is scheduled to take place in November
2024.
1
PitchBook, data is for global private equity and venture capital as
of September 30, 2023.
2 These
figures represent the weighted average percentage uplift to
carrying value of 79 individual company M&A and IPO
transactions during the year ended 31 January 2024. This analysis
takes each company's value (whether realised or unrealised) at 31
January 2024 and compares it to the carrying value prior to
announcement of the transaction. This analysis represents 83% of
the total value of transactions in the year ended 31 January 2024
and does not represent the portfolio as a whole. Additionally, it
does not reflect management fees, carried interest, and other
expenses of the HarbourVest funds or the underlying managers, which
will reduce returns. Past performance is not necessarily indicative
of future returns.
3 Bain,
data as of January 2024.
4
Refinitiv, data as of September 30, 2023.
5
HarbourVest, AVCJ, and APER, data as of September 30,
2023.
New
commitments
HVPE made total commitments of $295
million across five HarbourVest funds over the financial year to 31
January 2024 (12 months to 31 January 2023: $940 million). Total
unfunded commitments were $2.5 billion as at 31 January 2024,
representing a net decrease of approximately $300 million from 31
January 2023 ($2.8 billion).
During the period, total
commitments were reduced considerably from the original plan in
response to the low level of portfolio exit activity. Post
period-end, no new commitments have been made to HarbourVest funds.
We would expect new commitments to return to more normal levels
once positive cash flow has been sustained for a reasonable period
of time.
This remains in line with the
Company's strategic asset allocation targets described above, and
reflects the Investment Manager's and Board's current perspective
on the most appropriate portfolio composition required to optimise
long-term NAV growth for shareholders.
Outlook
We expect 2024 to be a better year
for private markets than last year. The improvements in the
investment environment seen during Q4 of 2023 have continued in the
early months of this year. Equity indices, including the Nasdaq,
have reached new highs, and confidence in the AI revolution is
growing. Crucially for private markets, IPOs are re-starting. The
expected listing of Klarna, one of Europe's largest fintech
companies, could provide a significant boost to both sentiment and
activity. Shein, an online fashion retailer, has filed for IPO this
year, with management evaluating a number of potential listing
venues. M&A activity is also picking up, as a stabilising macro
environment facilitates agreement on pricing, and scepticism over
NAVs appears to be abating. This paves the way for a pick-up in
exits in H2, which, if realised, will provide further, much-needed
validation of NAVs. Venture and growth could also generate some
real surprises in AI-related areas such as machine learning and
synthetic biology.
Listed private equity investment
companies are still under pressure from several quarters: outflows
from open-ended UK equity funds and ETFs continue, asset managers
are striving to reduce reported look-through costs; while discount
volatility and a reduced appetite for risk are still limiting
demand for investment companies more broadly. However, any discount
narrowing in the listed private equity sector would provide further
reassurance that the industry is on the road to recovery, and this
would have a favourable knock-on effect for HVPE.
While performance can fluctuate
from year to year, whatever the immediate future holds, private
equity investment requires a long-term perspective. On this basis,
HVPE's strategy has a track record of outperforming listed global
equities. Over the 10 years ended 31 January 2024, HVPE's NAV per
share returns exceeded those of the FTSE All-World Total Return
Index by an annualised 4.3 percentage points.
We believe our strategy of
operating a well diversified, quality portfolio is working well and
we are confident it will continue to do so in the future,
especially if the investment environment continues to improve as we
anticipate. Yet even capital-constrained circumstances such as
those we currently face, create opportunities for those who have
the ability to deploy selectively, as there are high-quality,
attractively priced deals with strong growth tailwinds available.
As always, we continue to strive to create value for shareholders
over the long term.
Richard Hickman
Managing Director
NAV
per share - 12 Months to 31 January 2024
HVPE's NAV per share increased by
4.0% in the 12 months to 31 January 2024, ending the financial year
at $50.47.The FTSE AW TR Index (in US dollars), increased by 15.3%
in the same period.
Over the long term, HVPE's NAV per
share return has been strong. The 31 January 2024 figure of $50.47
is more than double the NAV per share figure reported five years
earlier (31 January 2019: $24.09) and more than 3.5x the respective
figure ten years earlier (31 January 2014: $14.38). As a reminder,
these figures are net of all fees and costs.
HVPE remains well diversified by
sector, which we believe is key to achieving consistently strong
returns from a private markets portfolio. As at 31 January 2024, no
single company represented more than 2.1% of the Investment
Portfolio value (31 January 2023: 2.4%), helping to mitigate
company-specific risk. The top 100 companies in the portfolio
represented 28% of total value (31 January 2023: 29%), while the
top 1,000 companies represented 81% (31 January 2023:
81%).
The Secondary portfolio was the
best performing strategy in percentage terms, delivering value
growth of 8.2% over the 12 months. Geographically, Europe, North
America and Rest of World categories all saw growth at 9.5%, 6.6%
and 6.2%, respectively, while Asia saw a modest decline (-0.5%).
Looking at stages, the Buyout portfolio was the strongest
performer, growing 8.6% in the 12 months ended 31 January 2024.
Mezzanine and InfRA also grew, recording a 7.1% gain, along with a
modest increase of the Venture and Growth Equity stage assets
(+1.3%).
As at 31 January 2024, HVPE held
investments in 63 HarbourVest funds and 16 secondary
co-investments1 (compared with 61 and 16 respectively at
31 January 2023). Of these, the largest fund contributors to NAV
per share movement in absolute terms during the 12 months to 31
January 2024 are described below:
· Fund
XII Buyout, a US-focused buyout fund of funds, was the largest
contributor to NAV per share, adding $0.34 over the reporting
period. With a vintage year of 2021, this fund is in its investment
phase. The increase came predominately from unrealised
gains.
· Fund
XI Buyout, a US-focused buyout fund of funds, was the
second-largest contributor over the reporting period, adding $0.27
to NAV per share. With a vintage year of 2018, this fund is in its
growth phase. The increase came predominately from unrealised
gains.
· Fund X
Buyout, a US-focused buyout fund of funds, was the third-largest
contributor, adding $0.23 to NAV per share. With a vintage year of
2015, this fund is in its growth phase. The increase was evenly
split between realised and unrealised gains.
· Fund X
Venture, a US-focused venture fund of funds, was the largest
negative contributor over the reporting period, reducing NAV per
share by $0.16. With a vintage year of 2015, this fund is in its
growth phase. This decrease came predominantly from unrealised
losses.
· Dover
Street XI, a global-focused secondary fund, was the next largest
contributor over the reporting period, adding to NAV per share by
$0.14. With a vintage year of 2022, this fund is in its investment
phase. The increase came predominately from unrealised
gains.
All of the remaining HarbourVest
funds in the portfolio together contributed to an aggregate $1.40
increase to HVPE's NAV per share over the period.
1
These include four Secondary Overflow III investments, 11 Secondary
Overflow IV investments, and Conversus, referred to as "HVPE
Charlotte Co-Investment L.P." in the Audited Consolidated Schedule
of Investments.
Portfolio Cash Flows and Balance Sheet
In the 12 months to 31 January
2024, HVPE received cash distributions of $310 million (12 months
to 31 January 2023: $532 million) while funding capital calls of
$593 million for new investments (12 months to 31 January 2023:
$588 million). The result was net negative cash flow of $283
million over the reporting period.
Distributions were driven in large
part by particularly strong months in June and December 2023,
during which combined cash proceeds of $138 million were received,
predominately from the primary funds. This contributed over 44% of
the total distributions over the period.
A meaningful portion of the
distributions received in the 12 months to 31 January 2024 came
from the ongoing redemption of the HarbourVest Infrastructure
Income Partnership ("HIIP"), the permanent capital vehicle
resulting from HVPE's commitment to Adelaide. During the period
HVPE received $38 million in total distributions from the HIIP
fund. As mentioned in prior reports, HVPE has now completed the 50%
redemption of the original commitment and will continue to receive
a share of ongoing management fee revenue due to its remaining
holding in the fund.
The largest HarbourVest fund
capital calls and distributions over the reporting period are set
out in the tables below. The top ten HarbourVest fund calls in
aggregate accounted for $436 million (74%) of the total calls and
came from a broad mix of funds. The majority of total calls by
value (78%) were into primary opportunities. The top ten
HarbourVest fund distributions totalled $155 million, or 50% of the
total proceeds received in the period. Distributions by value were
split between primary investments (64%) and secondary investments
(25%), with the remainder coming from direct
co-investments.
The HarbourVest fund-level
borrowing as at 31 January 2024 is reported in Managing the Balance
Sheet on page 28.
Top Five HarbourVest Fund Calls
|
HarbourVest
Fund Name
|
Vintage Year
|
Description
|
Called
amount
|
|
Fund XII Buyout
|
2021
|
US-focused
buyout fund of funds
|
$101.5m
|
|
HIPEP IX
|
2020
|
International multi-strategy fund of funds
|
$58.2m
|
|
Co-Investment VI
|
2021
|
Global
direct co-investment fund
|
$56.3m
|
|
Dover Street XI
|
2022
|
Global
multi-stage secondary fund
|
$42.5m
|
|
Fund XI Buyout
|
2018
|
US-focused
buyout fund of funds
|
$39.2m
|
Top Five HarbourVest Fund Distributions
|
HarbourVest
Fund Name
|
Vintage Year
|
Description
|
Distributed amount
|
|
HIIP2
|
2018
|
Global
core / core+ infrastructure assets
|
$38.0m
|
|
HIPEP VII Partnership
|
2014
|
International multi-strategy fund of funds
|
$21.9m
|
|
HIPEP VII Europe
|
2014
|
Europe-focused multi-strategy fund
|
$16.4m
|
|
HIPEP VI Partnership
|
2008
|
International-focused fund of funds
|
$14.8m
|
|
Fund VIII Buyout
|
2006
|
US-focused
buyout fund of funds
|
$12.9m
|
2
The distribution represents a partial redemption as a result of its
planned conversion from Adelaide into a permanent capital vehicle
in July 2022.
Portfolio Companies
During the period the ten largest
individual company realisations generated total distributions of
$72 million, accounting for approximately 23% of all proceeds
received. Of these ten companies, four were disclosed in HVPE's top
100 portfolio companies as at the end of the prior financial
year.
Further details are provided on
these four below (ordered by size of distribution). The top ten
distributions by value are listed on page 23.
· CarepathRx is a firm that partners with health systems,
hospitals, physicians, and pharmacies to provide comprehensive
pharmacy care in the United States. CarepathRx was HVPE's 23rd
largest company at 31 January 2023, and generated proceeds of $8.6
million following the sale of the company's
subsidiary BioPlus Specialty Pharmacy as announced in November
2022.
· Groundworks (formerly JES Construction) is a firm that
provides structural engineering and construction services. It was
HVPE's 48th largest company at 31 January 2023 and generated
proceeds of $7.3 million following the announcement of a strategic
partnership with a global private equity firm.
· Dynatrace provides software solutions for diagnosing
performance problems in J2EE and .Net applications. The company was
HVPE's 98th largest company at 31 January 2023 and generated
proceeds of $6.5 million.
· Virgin
Pulse is a firm that provides employee wellness software and was
HVPE's 50th largest company at 31 January 2023. It generated
proceeds of $5.8 million following its merger with
HealthComp, as announced in September 2023.
M&A Transactions and IPOs
During the 12 months ended 31
January 2024, there were a total of 362 known M&A transactions
and IPOs, compared to 327 total transactions reported in the 12
months to 31 January 2023. Within HVPE's portfolio, we are seeing
some green shoots in terms of IPO and M&A activity for the year
ahead and are hopeful we will see an improvement in exit
activity.
Approximately 88% (318) of these
transactions were M&A (trade sales or sponsor-to-sponsor
transactions), with the remaining 12% (44) being IPOs. 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
362 known M&A transactions and IPOs, 163, or 45%, related to
buyout-backed companies. A further 176 or 49% related to
venture-backed companies, and the remaining 23 (6%) related to
Other companies. Over the period, the weighted average uplift to
pre-transaction carrying value for a large sample of transactions
was 24%.3
The top five M&A transactions
during the period (by contribution to HVPE NAV per share) are
listed below.
Top
Five M&A transactions
(by contribution to HVPE NAV per
share4)
|
Reward Gateway
|
Other
|
Information Technology
|
+$0.04
|
|
GGW Holding
|
Buyout
|
Financials
|
+$0.04
|
|
Groundworks (formerly JES
Construction)
|
Buyout
|
Industrials
|
+$0.03
|
|
Undisclosed
|
Buyout
|
Financials
|
+$0.03
|
|
Tuskerdirect Limited
|
Buyout
|
Consumer Discretionary
|
+$0.03
|
Top
Five IPOs
(by contribution to HVPE NAV per
share4)
|
Tata Technologies
|
Venture
|
Industrials
|
+$0.03
|
|
Mankind Pharma (Maize
Investments)
|
Venture
|
Health Care
|
+$0.01
|
|
Zhengzhou Guoquanshihui Network
Technology Co., Ltd.
|
Venture
|
Consumer Staples
|
+$0.01
|
|
Hitachi Kokusai Electric
Inc.
|
Buyout
|
Information Technology
|
+$0.01
|
|
Savers, Inc.
|
Other
|
Consumer Discretionary
|
+$0.01
|
3
These figures represent the weighted average percentage uplift to
carrying value of 79 individual company M&A and IPO
transactions during the year ended 31 January 2024. This analysis
takes each company's value (whether realised or unrealised) at 31
January 2024 and compares it to the carrying value prior to
announcement of the transaction. This analysis represents 83% of
the total value of transactions in the year ended 31 January 2024
and does not represent the portfolio as a whole. Additionally, it
does not reflect management fees, carried interest, and other
expenses of the HarbourVest funds or the underlying managers, which
will reduce returns. Past performance is not necessarily indicative
of future returns.
4
As measured since the announcement of the transaction or IPO
filing.
Recent events
HVPE
Estimated NAV as at 30 April 2024
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 20 May 2024, HVPE published an
estimated NAV per share at 30 April 2024 of $50.47 (£40.40), is
unchanged since the final 31 January 2024 NAV (US Generally
Accepted Accounting Principles ("GAAP")) figure of $50.47. This
latest NAV per share is based on a valuation breakdown of: 6% as at
30 April 2024 (reflecting the public company in the portfolio), 3%
actual 31 March 2024 and 91% actual 31 December 2023. Consistent
with previous estimated NAV reports, valuations are also adjusted
for foreign exchange movements, cash flows, and any known material
events to 30 April 2024.
The Investment Pipeline of unfunded
commitments decreased from $2.5 billion at 31 January 2024 to $2.3
billion at 30 April 2024, based on capital funded and taking
foreign exchange movements into account.
HVPE's cash and cash equivalents
also decreased from $140 million at 31 January 2024 to $60 million
at 30 April 2024.
HVPE's look-through exposure to
borrowing at the HarbourVest fund level had decreased by $19
million, from $508 million at 31 January 2024 to $489 million at 30
April 2024. The latest balance sheet ratios can be found in the
factsheet on the HVPE website: www.hvpe.com.
Distribution Policy and Share Buybacks
In February 2024, the Board
introduced a new distribution policy which established a
Distribution Pool to be used either to fund future share buybacks
or return capital to shareholders by means of special dividends.
The aim is to free up materially more cash for shareholders to
bolster their returns through the cycle. The Distribution Pool is
being funded by a proportion of the cash realisations from the
Company's portfolio, with this proportion set initially at 15%. For
further information, see the Director's Report on page
71.
Post period-end, HVPE has been in
the market for 12 days buying back shares. During this time,
714,154 ordinary shares have been repurchased for cancellation at
an average price of £23.67 per share for a total consideration of
£16.9 million ($21.5 million). The total number of shares in issue
is now 76,969,354.
Currently, the Distribution Pool
balance is $52 million.
Credit Facility
Post period-end, HVPE has initiated
draws on the Facility, which together have totalled $90 million. As
at 24 May 2024, a total of $365 million is currently drawn on the
$800 million Facility. More details regarding the Facility are
available on page 29.
Share Price since 31 January 2024
The closing price of £22.85 on 24
May 2024 represents a fall of 1.3% since period-end. This compares
to the FTSE AW TR index's increase of 9.1% in US dollars over the
same period. The market capitalisation of the Company as at 24 May
2024 was £1.8 billion and, as of the same date, HVPE was ranked
75th in the FTSE 250 (19 May 2023: 77th).
KPIs
and investment objective
The Company's investment objective
is to generate superior shareholder returns through long-term
capital appreciation by investing primarily in a diversified
portfolio of private markets investments.
Key Performance Indicators
("KPIs")1
Total Shareholder Return (1 year and 10
years)
The key measure of HVPE's
performance is the total return experienced by its shareholders.
While NAV per share is the major driver, the level of any premium
or discount to NAV at which HVPE's shares trade is also
relevant.
A significant majority of HVPE's
shareholders are UK based, and most of the trading volume is in
sterling.
1
Please note some of these KPIs are also Alternative Performance
Measures ("APMs"). Please see pages 126 to 127 for our
APMs.
NAV per Share Return (1 year and 10 years)
HVPE seeks to achieve growth in NAV
per share materially ahead of public markets over the long term, as
defined by the FTSE All World Total Return ("FTSE AW TR") Index in
US dollars. The FTSE AW TR is a global equity index with
geographical weightings comparable to HVPE's portfolio.
Please refer to the Alternative
Performance Measures on pages 126 to 127 for details of performance
calculations
Balance Sheet Strength
The Board and the Investment
Manager actively monitor HVPE's balance sheet by means of a set of
key ratios, with a view to maintaining a robust financial position
under all plausible forecast scenarios.
Please see Managing the Balance
Sheet on page 28 for more details on the ratios and page 31 of the
Investment Manager's report for more detail on the net portfolio
cash flow.
Liquidity in the Shares (Daily Trading
Volume)
Current and prospective
shareholders place a high value on liquidity as it provides
reassurance that there is a ready market in the shares should they
wish to manage their position. The Board and the Investment Manager
monitor liquidity on a regular basis using the daily
mean.
Daily liquidity, measured by mean
daily trading volume, declined over the period. This largely
reflects the lower levels of trading activity from market
participants on the back of wider macro concerns.
Managing the balance sheet
Effective and prudent balance sheet
management is critical when running a closed-ended vehicle
investing into a portfolio of private market funds with varying
cash flow profiles. This is particularly true for a company such as
HVPE which maintains a large pipeline of unfunded commitments (the
"Investment Pipeline"), which is the amount of capital committed to
an underlying HarbourVest fund, but not yet drawn down for
investments.
This section aims to outline HVPE's
approach to managing its balance sheet and explain the steps it
takes to ensure that the Company is sufficiently resourced in
preparation for periods of significant market stress.
The
Importance of the Credit Facility
HVPE makes commitments to
HarbourVest funds, which typically call capital over a period of
several years. This long- duration cash flow profile necessitates a
large pipeline of unfunded commitments in order to ensure that the
Company remains approximately fully invested over time - this is
known as an over-commitment strategy and is critical to optimising
long-term NAV per share growth. In most years, the capital called
from HVPE by the HarbourVest funds is taken from the cash
distributions flowing from liquidity events within the portfolio.
At times, however, capital calls will exceed distributions,
potentially by a meaningful amount, and it may be necessary to draw
on the credit facility to fund the difference. A subsequent year
may see the reverse situation, with net positive cash flow used to
repay the borrowing. In this way, the credit facility acts as a
working capital buffer and enables HVPE to manage its commitments
to the level required in order to optimise returns through the
cycle.
At 31 January 2024, HVPE had a $800
million multi-currency credit facility (the "Facility"), with
Credit Suisse AG London Branch ("Credit Suisse") providing $400
million, Mitsubishi UFJ Trust Banking Corporation ("Mitsubishi")
acting through its New York Branch providing $300 million, and The
Guardians of New Zealand Superannuation, a Crown entity established
to manage the New Zealand Superannuation Fund, providing $100
million.
From January 2019, the Facility
featured an evergreen term, with lenders bound by a rolling minimum
notice period of five years. As announced on 20 January 2023,
following the formal receipt of notices, the Facility reverted to a
conventional fixed-term arrangement. The $400 million commitment
from main lender Credit Suisse, and the $300 million commitment
from Mitsubishi, acting through its New York Branch, will both
expire on 12 January 2028. The remaining $100 million from The
Guardians of New Zealand Superannuation will expire on 15 August
2027.
During the course of 2023, HVPE
drew a total of $275 million on the Facility as a prudent measure
to help manage portfolio cash flow and to fund share buybacks. As
at 31 January 2024, HVPE had $525 million available on the
Facility. Post period-end, as at 24 May 2024, the Company had $435
million available.
The Board and Investment Manager
are confident that this Facility provides sufficient headroom for
HVPE's existing and planned commitments over the period. The Board
is conscious of the need to ensure that the credit facility is
always of a size and duration appropriate to HVPE's needs. The
Board intends to refresh the facility and is currently well
advanced in this process.
Further detail on how we stress test
the balance sheet can be found overleaf.
Understanding HVPE's Investment Pipeline (Unfunded
Commitments)
At 31 January 2024, HVPE's total
pipeline of unfunded commitments - commitments to HarbourVest funds
which have yet to be called - stood at $2.5 billion. This total
pipeline comprised "allocated" investments of $1.9 billion and
"unallocated" investments of $0.6 billion. "Allocated" refers to
the portion of commitments which have been allocated by HarbourVest
funds to underlying partnerships. "Unallocated" commitments are
those which have yet to be allocated by HarbourVest funds to
underlying partnerships, and therefore cannot be drawn down in the
short term. It is important to note that, of the allocated
pipeline, approximately 64% of commitments are to primary funds,
which have a longer drawdown profile, whilst secondary and direct
co-investment funds represent approximately 26% and 10%,
respectively. Further detail on this, including the age breakdown
of the allocated pipeline, is provided on page 20.
Since July 2022, HVPE's portfolio
cash flow has been negative, as capital calls have exceeded
distributions. Initially, the shortfall was met from the cash
surplus accumulated through 2021 and early 2022. In the first half
of 2023, the cash balance fell below our approved agreed minimum
level and we subsequently drew on our credit facility. Periods of
negative cash flow do occur from time to time and are factored into
our cash flow projections. Prior periods of negative cash flow have
been relatively brief, but nevertheless we do plan for extended
periods of weak distributions combined with normal or elevated
capital calls.
We cannot be sure that this pattern
will be repeated and must consider the possibility that capital
calls could remain elevated even during a period of suppressed
distribution activity. A large credit facility committed for an
extended period, as noted above, provides reassurance that the
Company would be able to remain operational under such conditions,
with the additional flexibility to continue to take advantage of
attractive investment opportunities as they arise. HVPE's large
credit facility enabled it to be a net investor through the period
2008 to 2011, which has helped the Company to deliver very
attractive long-term returns for shareholders. We continue to
assess the credit facility to ensure that its size and cost remain
proportionate to the benefits that it brings to HVPE.
Cash
Flows, Modelling and Stress Testing the Balance
Sheet
Cash flows from individual private
equity investments can be irregular and unpredictable, and as a
result, monitoring these is a complex and time-consuming task for
investors in multiple funds such as HVPE. When managing a
closed-ended vehicle that makes significant, irrevocable
commitments to underlying funds, effective cash flow modelling is
essential, first to ensure that the Company has sufficient capital
available to honour its existing commitments, and second to inform
the decisions it makes around future commitment levels.
The Investment Manager builds a
bottom-up forecast based on an aggregation of individual
HarbourVest fund models, and then applies a sensitised top-down
analysis informed by historic actual calls and distributions.
Short-term broader market trends and systemic factors are also
considered.Finally, a range of scenario tests are conducted. HVPE
now has a 16-year track record in monitoring and interpreting cash
flows arising from activity in the underlying portfolio. This
detailed modelling is typically updated on an annual basis and
reviewed quarterly for any changes to key assumptions. The
scenarios under which Directors consider the Company to be a Going
Concern can be found on page 72.
HarbourVest Fund-level Borrowing
HarbourVest funds employ credit
lines for two main purposes: bridging capital calls and
distributions and financing specific investment projects where the
use of debt may be advantageous. The majority of this fund-level
borrowing represents delayed capital calls, where a proportion 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.
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). This borrowing does not represent an
additional liability above and beyond the commitments that HVPE has
made to the HarbourVest funds.
The HVPE team monitors the
HarbourVest fund-level borrowing in absolute terms, and as a
percentage of NAV. This borrowing is also considered when
evaluating balance sheet ratios: the Total Commitment Ratio within
the Investment Pipeline, and the Medium-Term Coverage Ratio within
the three-year capital call projections. HarbourVest fund-level
borrowing is also included when assessing the credit facility's
loan-to-value ratios, as mentioned in Note 6, "Debt Facility" on
page 105 of the Financial Statements. Possible changes in this
borrowing (and hence the timing of capital calls payable by HVPE)
are also incorporated into the balance sheet scenario tests
conducted as part of the annual commitment planning
exercise.
As at 31 January 2024, HVPE's share
of HVP fund-level borrowing on a look-through basis was $508
million, a net decrease of $9 million from the $517 million
reported at 31 January 2023. Expressed as a percentage of NAV, this
figure was unchanged over the period, remaining at 13%. This can be
attributed directly to fewer new commitments being made, and
borrowings on older funds being paid down during the period. Post
period-end, as at 30 April 2024, the fund-level borrowing decreased
by $19 million and stood at $489 million.
HVPE's year end total exposure of
$508 million includes $466 million (92%) of bridging finance (also
known as subscription line finance) which is used to delay and
smooth the pacing
of capital calls to investors in
the funds, including HVPE. Typically, these bridging facilities are
committed by the lenders for a minimum of 12 months. The remaining
$42 million
(8%) is project debt, held in the
most part by the HarbourVest secondary funds to finance specific
projects. The bridging finance, should it be repaid in full or in
part, will result in capital calls to investors in the HarbourVest
funds, including HVPE, as this type of borrowing represents a
portion of HVPE's existing unfunded commitment (Investment
Pipeline) figure. Furthermore, during the period in which the debt
is outstanding, there is a gearing effect on HVPE's NAV, as the
investments have already been made while HVPE's share of the
capital has not yet been called. Project finance has only a very
limited impact on prospective cash flow but does contribute to the
gearing effect.
In order to estimate the total
potential gearing effect on HVPE as at 31 January 2024, an investor
should take the total fund-level borrowing figure of $508 million
and factor in HVPE's net cash/debt position at the Company level
(i.e. add the Company's net debt of $135 million). The resulting
net total borrowing figure of $643 million would translate to an
approximate level of look-through gearing of 16% at the financial
year end. 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 105 of the Audited Consolidated Financial
Statements.
Please refer to page 31 of the
Annual Report and Accounts for further information on Balance Sheet
Ratios.
Managing costs
Total Expense Ratio ("TER")
HVPE's TER reflects the total cost
incurred by the Company in assembling and maintaining its portfolio
of HarbourVest funds and co-investments. The figure is broken down
into four distinct categories of expense.
First, there is the direct cost of
running the Company in its own right, encompassing items such as
the maintenance of the credit facility, Board fees and expenses,
professional fees, marketing, financial reporting, the services of
a dedicated team from the Investment Manager, and compliance costs.
These costs, totalling 0.72% of average NAV in the 12 months to 31
January 2024 (12 months to 31 January 2023: 0.36%), are categorised
as recurring operating expenses as shown in the first line of the
table below. The increase in operating expenses is due to the
greater utilisation of the credit facility during the
year.
Second, operating costs borne by
the HarbourVest funds amounted to a further 0.22% of average NAV in
the 12-month period to 31 January 2024 (12 months to 31 January
2023: 0.25%).
Third, HVPE pays management fees to
HarbourVest with respect to the funds in which it invests, and also
for the secondary co-investment in Conversus1 made
alongside the HarbourVest funds. The total of all management fees
in the 12 months to 31 January 2024 was equivalent to 0.60%
of
average NAV (12 months to 31
January 2023: 0.59%).
Finally, performance fees are
charged on secondary investments and direct co-investments (not on
primary investments which make up 50% of HVPE's portfolio). In
total, these accounted for 0.48% of average NAV in the 12 months to
31 January 2024 (12 months to 31 January 2023: 0.08%).
The performance fee figure varies
from period to period and is driven by the performance achieved by
the relevant HarbourVest funds.
Together, these four cost
components give a TER, net of interest income (0.23%), of 1.79% for
the 12 months to 31 January 2024. It is important to note that,
while the operating expenses and the management fees do not vary
greatly from one year to the next, the performance fee figure will
vary significantly depending on the returns delivered by the
relevant underlying HarbourVest funds. The TER for the 12 months to
31 January 2024 of 1.79% was 0.61 percentage points higher than the
same period in the prior year, predominantly owing to a significant
increase in performance fees and the credit facility
costs.
The calculation above excludes the
fees charged by the underlying partnerships held by the HarbourVest
funds. An estimate of HVPE's full look-through TER is included in
the Company's Key Information Document, available on the website.
It is important to note that all performance data we report to
shareholders is, and always has been, net of all fees and
expenses.
1
"HVPE Charlotte Co-Investment L.P." in the Audited Consolidated
Schedule of Investments.
Total Net Expense Ratio Breakdown
|
|
|
12 Months
to 31 January
2024
|
12
Months
to 31
January
2023
|
|
Operating expenses2
|
|
0.72%
|
0.36%
|
|
HarbourVest fund operating expenses3
|
|
0.22%
|
0.25%
|
|
Management fees4
|
|
0.60%
|
0.59%
|
|
Operating expense ratio
|
|
1.54%
|
1.20%
|
|
Interest income5
|
(0.23)%
|
(0.10)%
|
|
Net operating
expense ratio
|
1.31%
|
1.10%
|
|
Performance fees6
|
0.48%
|
0.08%
|
|
Total net
expense ratio7
|
1.79%
|
1.18%
|
2
Operating expenses includes total expenses shown in the Audited
Consolidated Statements of Operations, excluding management fees
from the secondary co-investments which are included in the
management fees in this table.
3
HVPE's share of fund-level operating expenses (professional fees
and organisational costs) which are included in realised and
unrealised gains (losses) on investments in the Audited
Consolidated Statements of Operations.
4
This includes fund-level management fees payable to HarbourVest
which are included in realised and unrealised gains (losses) on
investments in the Audited Consolidated Statements of Operations,
together with the management fees relating to secondary
co-investments noted in 2 above.
5
This is shown as interest from cash and equivalents on the face of
the Audited Consolidated Statements of Operations.
6
This includes fund-level performance fees payable to HarbourVest
which are included in realised and unrealised gains (losses) on
investments in the Audited Consolidated Statements of
Operations.
7
TERs are calculated using the average NAV over the respective
periods ($3.9 billion at 31 January 2024 and $3.8 billion at 31
January 2023).
Principle 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 on the Board's
governance and oversight can be found on pages 77 to 79.
Risk Appetite
The Board's investment risk
appetite is to follow an over- commitment policy that optimises
investment returns and associated distributions, allows balanced,
regular investment through economic and investment cycles, and
ensures 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
its ability and desire to control and mitigate the risk to an
acceptable level. In doing so, as a baseline, the Board will seek
to follow best practice and remain compliant with all applicable
laws, rules, and regulations.
Risk
Management
As recommended by the Audit and
Risk Committee (see the report on the activities of that Committee
on pages 77 to 79), the Directors have adopted a risk management
framework which governs how the Board identifies and measures
risks, determines risk appetite, assesses mitigation and controls,
and reports on risks.
The Board reviews risks at least
twice a year and receives in depth reports on specific risks as
recommended by the Audit and Risk Committee. The Board divides
identified risks into those which have a higher probability and a
significant potential impact and those which are less material and
are monitored on a watch list. The Board also conducts an annual
exercise to identify new or emerging risks.
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 is assessed as being most significant and which the Board
therefore considers could seriously affect the performance, future
prospects, or reputation of the Company.
During the year under review, the
Board has adapted its approach to ESG risk which it now considers
as a distinct aspect of all the individual risks faced by the
Company. As a result, ESG risk has been integrated into the Board's
assessment of all the material risks faced by the Company, and
while ESG regulatory risk is still considered as a risk in its own
right, broader ESG risk is no longer separately identified as a
principal risk.
|
Principal
Risk
|
Description and Potential
Impact
|
Mitigation and
Management
|
Commentary
|
|
Performance of HarbourVest
The risk posed by the Company's
dependence on its Investment Manager.
|
The Company is dependent on its
Investment Manager and on the performance of HarbourVest's
investment professionals. The vast majority of the Company's assets
are invested in HarbourVest funds and significant reliance is
placed by the Company on HarbourVest's control environment.
Any inability by HarbourVest to maintain its investment
performance, whether in absolute or relative terms, could result in
a significant deterioration in net asset value for the Company and
its shareholders.
|
HarbourVest has a strong long term
track record of managing private equity investments. It maintains
good relationships with key managers and has a consistent and
repeatable investment process with low turnover of senior
investment professionals. There is a high level of diversification
by geography, strategy and vintage which mitigates the risk. HVPE
has a dedicated Investment Committee within HarbourVest. The Board
monitors HarbourVest's performance through the MESPC, and its
controls environment is assessed by the Audit and Risk
Committee.
|
Stable
HVPE has maintained its record of
long-term outperformance in NAV growth despite challenging market
conditions. It continues to enhance its investment processes and
the quantitative inputs to its investment decision making and
maintains its access to new investment opportunities. No
significant matters of concern regarding the HarbourVest control
environment arose during the year.
|
|
Public Market Risks
The risk of a decline in global
public markets or a deterioration in the economic
environment.
|
Equity market volatility increases
overall levels of uncertainty for HVPE and its investments.
Increasing geopolitical risks influence how markets trade,
reversing the potential positive effects of developing improvements
in economic indicators. Overall declines in public markets
impact HVPE's NAV per share by directly reducing the value of
public securities in HVPE's portfolio and indirectly influencing
private market valuations. They are also likely to have a
direct impact on HVPE's share price.
|
The Company's exposure to individual
public markets is partially mitigated by the geographical and
sectoral diversification within the portfolio. In previous
downturns private market valuations have not been impacted as much
as public markets. The Board regularly reviews scenario analyses
prepared by the Investment Manager which incorporate the effects of
significant public market downturns.
|
Stable
The portfolio has proved itself to be
resilient despite challenging market conditions over the past year
and the increased political risk that has affected markets. The
level of this risk was increased in the previous financial year and
has been maintained at this heightened level.
|
|
Valuation Risk
The risk that market instability
leads to continuing uncertainty about private asset valuations
based on comparisons with listed companies, together with general
market scepticism about the likely movement in
valuations.
|
Uncertainty and distrust in relation
to the valuation of private equity investments may lead investors
to make their own judgements based on incomplete information which
could result in a lack of confidence in the reliability of HVPE's
published NAV. The low level of exits and liquidity events that has
been seen recently reduces the ability to present public
substantiation of valuation levels.
|
Both the Investment Manager and the
GPs of underlying funds value investments in accordance with
industry standards and accounting regulations. All the valuations
are audited annually. When the Company reports its monthly NAV, it
discloses the date of the underlying valuations to provide
transparency to shareholders. The Audit and Risk Committee receives
reports on the Investment Manager's control environment, including
the processes relating to valuations.
|
Stable
This risk was identified as a
Principal Risk during the
financial year under review and was
disclosed as such in
the 2023 Annual Report and Accounts.
Given that the risk
level was elevated at that stage, it
has not been further
increased since then. The Board
believes that this risk will
remain a focus until there is an
increase in the level of exit
activity and therefore of external
validation of valuation
levels.
|
|
Balance Sheet Risks
Risks to the Company's balance sheet
resulting from its overcommitment strategy, borrowing arrangements
and policy for the use of leverage.
|
The Company's balance sheet strategy
and its policy for the use of leverage are described on page 29.
The Company continues to maintain an overcommitment strategy and
may draw on its credit facility to bridge periods of negative cash
flow when capital calls on investments are greater than
distributions received. The level of potential borrowing available
under the credit facility could be negatively affected by declining
NAV. In a stressed environment characterised by declining NAVs,
reduced realisations, and rapid substantial capital calls, the
Company's net leverage ratio could increase beyond an appropriate
level, resulting in a need to sell assets. A reduction in the
availability or use of borrowing at the HarbourVest fund level, or
accelerated repayment thereof, could result in an increase in
capital calls to a level in excess of the modelled
scenarios.
|
The size and term of the Company's
credit facility mitigates this risk. The Board has put a monitoring
programme in place, supported by sophisticated and comprehensive
cash flow modelling, which underpins the commitment strategy and
limits the likelihood of unexpected shocks. This programme
mitigates the requirement to sell assets at a discount during any
but the most extreme periods of negative cash flow. The monitoring
programme also considers the level of borrowing at HarbourVest fund
level. Both the Board and the Investment Manager will continue to
monitor these metrics actively and will take appropriate action as
required, such as pausing further commitments, to attempt to
mitigate these risks. Please also see the Going Concern and
Viability Statement on page 72 for information on the scenarios
that are considered by the Board.
|
Increased risk
The Distribution Pool is being funded
by a proportion of the cash realisations from the Company's
portfolio. This has resulted in adjustments being made to the
financial models relating to the Company's future commitments. In
previous years, strong NAV gains and distributions strengthened the
balance sheet. The levels of distributions received during the year
under review fell significantly in comparison with previous years
and with the modelled scenarios. As a result, cash flow was
negatively affected and there was increased use of the credit
facility. The Board intends to renew the credit facility well ahead
of the earliest expiry date. Since the year end, there have been
signs that the rate of distributions may return to more usual
levels but until this has been established as an ongoing trend, the
Board continues to consider this as a heightened risk for the
Company.
|
|
Popularity of the Listed Private Equity
Sector
The risk that investor sentiment
towards the listed private equity sector as a whole may deteriorate
significantly.
|
Investor sentiment towards the Listed
Private Equity sector may deteriorate, resulting in a widening of
the Company's share price discount relative to its NAV per
share. This may be because of perceptions of the position of
the market in the private equity cycle, perceptions about the cost
of private equity investing, or due to investors making their own
judgements regarding current valuations. HVPE's discount is
currently wider than its historical average and has remained so for
a sustained period.
|
Private equity has performed strongly
as an asset class over the years and the Company has demonstrated
the value of investing through the investment cycle and gaining
exposure to a diverse range of markets. HVPE, together with its
peers, continues to advocate for the sector, to increase investors'
familiarity with private equity and to describe the advantages of
the investment trust structure to provide access to illiquid assets
through a liquid share.
|
Stable
While discounts within the sector
remain wide, they have stabilised during the year and the market
commentary on the sector has become more balanced. The Board
believes that market sentiment towards the sector should turn more
positive once there is an increase in realisation events which
validate valuations and support cash flow.
|
|
Trading Liquidity and Price
The risk that the number of shares
traded in the Company is insufficient to maintain interest in the
stock, or that the discount of the share price to the NAV per share
fails to narrow.
|
HVPE's relatively wide discount risks
undermining investor confidence and could erode levels of
shareholder satisfaction. Despite the substantive efforts made by
the Board to address this issue through its establishment of the
Distribution Pool and active engagement with shareholders, some
investors may remain unconvinced by its proposals.
|
The Board has made robust efforts to
enhance its communications, to describe its strategy, to engage
with its shareholders, and to listen and respond to the views
expressed. The Distribution Pool has been established to address
certain issues raised and there is regular and extensive
consideration of potential options to close the discount, including
enhanced disclosure and transparency for shareholders. The Board
continues to stress the long-term nature of HVPE, the consistent
performance and the benefits of its diversification strategy as it
remains determined to satisfy its investment objective and
purpose.
|
Increased risk
Despite the substantive efforts made
to communicate the Board's strategy and the NAV performance that
has been achieved, HVPE's discount remains at the more extreme end
of the discount range. A long-term improvement has not yet been
seen and any positive response to the Board's efforts has not yet
been convincingly reflected in the share price performance despite
the continued positive investment performance and increase in NAV
per share.
|
|
|
|
|
|
Financial Statements
Independent Auditor's Report
to the Members of HarbourVest
Global Private Equity Limited
Opinion
We have audited the Consolidated
Financial Statements of HVPE (the "Company") and its subsidiaries
(the "Group") for the year ended 31 January 2024 which comprise the
Consolidated Statements of Assets and Liabilities, the Consolidated
Statements of Operations, the Consolidated Statements of Changes in
Net Assets, the Consolidated Statements of Cash Flows, the
Consolidated Schedule of Investments, and the related notes 1 to
12, including a summary of significant accounting policies. The
financial reporting framework that has been applied in their
preparation is applicable law and United States Generally Accepted
Accounting Principles ("US GAAP").
In our opinion, the Financial
Statements:
> give a true and fair view of
the state of the Group's affairs as at 31 January 2024 and of its
profit for the year then ended;
> have been properly prepared in
accordance with US GAAP; and
> have been properly prepared in
accordance with the requirements of the (Guernsey) Law,
2008.
Basis for Opinion
We conducted our audit in
accordance with International Standards on Auditing (UK) (ISAs
(UK)) and applicable law. Our responsibilities under those
standards are further described in the Auditor's responsibilities
for the audit of the financial statements section of our report. We
believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.
Independence
We are independent of the Group and
Company in accordance with the ethical requirements that are
relevant to our audit of the financial statements, including the
FRC's Ethical Standard as applied to listed public interest
entities, and we have fulfilled our other ethical responsibilities
in accordance with these requirements.
The non-audit services prohibited
by the FRC's Ethical Standard were not provided to the Group or the
Company and we remain independent of the Group and the Company in
conducting the audit.
Conclusions Relating to Going Concern
In auditing the Consolidated
financial statements, we have concluded that the Directors' use of
the going concern basis of accounting in the preparation of the
Consolidated Financial Statements is appropriate. Our evaluation of
the Directors' assessment of the Group's and Company's ability to
continue to adopt the going concern basis of accounting
included:
> We discussed with the
Directors their assessment of going concern, which included four
scenario analysis models - 'Base Case', 'Low Case', 'Optimistic
Case' and 'Extreme downside Case' scenarios - the 'Low Case' being
considered by the Directors to be the most likely
scenario;
> We ascertained that the going
concern assessment covered a period up until 30 June 2025 from the
date of approval of the Financial Statements;
> We reviewed the arithmetical
accuracy of the 'Low Case' and 'Extreme downside Case' scenario
models;
> For the 'Low Case' scenario we
reviewed the working capital documentation which supports the
Directors' assessment of going concern;
> We considered the estimation
uncertainty of the prior year's most likely scenario by comparing
it to the Group's actual performance to date, discussed the
material movements with the Board and the Investment Manager, and
obtained the required supporting documentation;
> For the 'Extreme downside
Case' scenario, we challenged the sensitivities and assumptions
used in the forecast through reverse stress testing to understand
how severe the downside scenario would have to be to result in the
elimination of liquidity headroom or a covenant breach;
> We held discussions with the
Audit Committee and Investment Manager to determine whether, in
their opinion, there is any material uncertainty regarding the
Group's ability to pay liabilities and commitments as they fall
due. Through these discussions we considered and challenged the
options available to the Group if it were in a stressed scenario.
These options included but were not limited to the use of credit
facilities and sales in the secondary market;
> We assessed whether the
commitments made to underlying investments cast significant doubt
over the going concern status of the Group and compared the
historical calls made by underlying investments as a % of the total
commitments made, including a discussion with the Investment
Manager regarding the possibility for uncalled commitments to be
called;
> We confirmed available credit
facility balances to understand the potential impact of the
leverage in the underlying funds;
> We recalculated the forecast
debt covenants on external loans to validate compliance within the
going concern period;
> We considered whether the
Directors' assessment of going concern as included in the Annual
Report is appropriate and consistent with the disclosure in the
viability statement; and
> We evaluated the disclosures
made in the Annual Report and Consolidated Financial Statements
regarding going concern to ascertain that they are in accordance
with US GAAP and have complied with, or explained reasons for
non-compliance, with all the AIC Code of Corporate Governance
provisions.
Based on the work we have
performed, we have not identified any material uncertainties
relating to events or conditions that, individually or
collectively, may cast significant doubt on the Group and Company's
ability to continue as a going concern over a period from the date
of approval of the Financial Statements to 30 June 2025.
In relation to the Group's
reporting on how they have applied the UK Corporate Governance
Code, we have nothing material to add or draw attention to in
relation to the Directors' statement in the financial statements
about whether the Directors considered it appropriate to adopt the
going concern basis of accounting.
Our responsibilities and the
responsibilities of the Directors with respect to going concern are
described in the relevant sections of this report. However, because
not all future events or conditions can be predicted, this
statement is not a guarantee as to the Group and Company's ability
to continue as a going concern.
Overview of Our Audit Approach
|
Key
audit matters
|
Risk of misstatement or
manipulation of the valuation of the Group's investments in the
underlying Primary or Secondary HarbourVest funds, together the
"HarbourVest investment funds".
|
|
Materiality
|
Overall Group materiality of £78.4m
which represents 2% of Net Assets.
|
An
Overview of the Scope of Our Audit
Tailoring the Scope
Our assessment of audit risk, our
evaluation of materiality and our allocation of performance
materiality determine our audit scope for each company within the
Group. Taken together, this enables us to form an opinion on the
Consolidated Financial Statements. We take into account size, risk
profile, the organisation of the group and effectiveness of
group-wide controls, changes in the business environment and other
factors such as the potential impact of climate change when
assessing the level of work to be performed.
The audit was led from Guernsey and
utilised audit team members from the Boston office of Ernst &
Young LLP in the US. We operated as an integrated audit team across
the two jurisdictions, and we performed audit procedures and
responded to the risk identified as described below.
The Group comprises the Company and
its five wholly owned subsidiaries as explained in Note 2 to the
Group Financial Statements. The Company, each subsidiary and the
consolidation are subject to full scope audit procedures. Other
than the investments which the Company holds directly, the
subsidiaries own the investments, which are set out in the
Consolidated Schedule of Investments, and on which we performed our
work on valuation.
Climate Change
Stakeholders are increasingly
interested in how climate change will impact HVPE. The Group has
determined that the most significant future impacts from climate
change on their operations will be from the investments made by the
underlying partnerships in which they are invested. These are
explained on pages 44 to 49 in the Purposeful Growth
(Environmental, Social and Governance). All of these disclosures
form part of the "Other information," rather than the audited
Consolidated Financial Statements. Our procedures on these
unaudited disclosures therefore consisted solely of considering
whether they are materially inconsistent with the Consolidated
Financial Statements or our knowledge obtained in the course of the
audit or otherwise appear to be materially misstated, in line with
our responsibilities on "Other information".
In planning and performing our
audit we assessed the potential impacts of climate change on the
Company's business and any consequential material impact on its
financial statements.
The Group has explained in Note 2
its articulation of the impact of climate change in the financial
statements. There are no significant judgements or estimates
relating to climate change in the notes to the financial statements
as the Board has concluded specifically that climate change
including physical and transition risks, does not have a material
impact on the Group's financial statements in Note
2.
Our audit effort in considering the
impact of climate change on the financial statements was focused on
the adequacy of the Group's disclosures in the financial statements
as set out in note 2 and the conclusions that there was no material
impact on the recognition and separate measurement considerations
of the assets and liabilities of the Group as at 31 January 2024.
As part of this evaluation, we performed our own risk
assessment to determine the risks of material misstatement in
the financial statements from climate change which needed to be
considered in our audit.
Based on our work we have not
identified the impact of climate change on the financial statements
to be a key audit matter or to impact a key audit
matter.
Key Audit Matters
Key audit matters are those matters
that, in our professional judgment, were of most significance in
our audit of the Consolidated Financial Statements of the current
period and include the most significant assessed risks of material
misstatement (whether or not due to fraud) that we identified.
These matters included those which had the greatest effect on: the
overall audit strategy, the allocation of resources in the audit;
and directing the efforts of the engagement team. These matters
were addressed in the context of our audit of the financial
statements as a whole, and in our opinion thereon, and we do not
provide a separate opinion on these matters.
|
Risk
|
Our Response to the Risk
|
Key
Observations Communicated to the Audit and Risk
Committee
|
|
Misstatement or manipulation of the valuation of the Group's
investments in the underlying Primary or Secondary HarbourVest
funds, together the "HarbourVest investment funds" ($4,058 million;
2023 $3,616 million).
Refer to the Accounting policies and
Note 4 of the Financial Statements.
There is a risk that the valuation of
the Group's investments at 31 January 2024, which comprise 103.5%
(2023: 94.3%) of net assets is materially misstated.
The valuation of the investments is
the principal driver of the Group's net asset value and hence
incorrect valuations would have a significant impact on the net
asset value and performance of the Group.
|
Our response comprised the performance of the following
procedures:
· Confirmed and documented our understanding of the Group's
processes, controls and methodologies for valuing investments held
by the Group in the HarbourVest investment funds, including the use
of the practical expedient as set out in Accounting Standard
Codification (ASC) Topic 820 Fair Value Measurement ("ASC 820")
by performing our walkthrough processes and evaluating the
implementation and design effectiveness of controls;
· We
also utilised the System and Organisation Controls 1 Report for
Private Equity Fund Administration Report on Controls Placed in
Operation and Tests of Operating Effectiveness ("SOC 1 report") of
HarbourVest Partner LLC to confirm our understanding of the
production on the NAVs of the HarbourVest investment
funds;
· Agreed
100% by value of the individual net asset values of each
HarbourVest investment fund to its underlying audited Net Asset
Value (NAV) in the corresponding financial statements as at 31
December 2023 which, prior to adjustments, formed the basis for the
Group's carrying amount as at 31 January 2024;
· We
obtained a schedule of all adjustments made to those audited and
unaudited NAVs between 1 January 2024 and 31 January 2024,
and:
· On a
sample basis verified contributions and distributions made to/from
the HarbourVest investment funds to supporting bank
statements;
· Recalculated a sample of accrued management fees in the
HarbourVest investment funds based on the terms of the signed
management agreements and agreed terms to relevant supporting
documents;
· Verified foreign exchange rate changes to independent
third-party sources, and their application to any HarbourVest
investment funds denominated in foreign currencies;
· Considered whether there were changes in market conditions
during the period from 1 January 2024 to 31 January 2024 that could
have had a material impact when applied to the key sensitive inputs
to the valuations of the direct investments of the HarbourVest
investment funds;
· Considered whether there were changes in market conditions
during the period from 1 January 2024 to 31 January 2024 that could
have had a material impact when applied to the marketable
securities held by the HarbourVest investment funds;
· Independently sourced third-party prices and verified fair
value changes on publicly traded securities held in the HarbourVest
investment funds; and
· Through enquiry determined that there were no post-closing
adjustments since 31 December 2023 or other material changes to the
NAV subsequent to the HarbourVest investment funds' finalized
financial reporting process.
· We
assessed the fairness, accuracy and completeness of the disclosures
in the Consolidated Financial Statements.
|
We reported to the Audit and Risk
Committee that we did not identify any instances of the use of
inappropriate methodologies and that the valuation of the Group's
investments in the HarbourVest investment funds were not materially
misstated.
|
Our Application of Materiality
We apply the concept of materiality
in planning and performing the audit, in evaluating the effect of
identified misstatements on the audit and in forming our audit
opinion.
Materiality
The magnitude of an omission or misstatement that,
individually or in the aggregate, could reasonably be expected to
influence the economic decisions of the users of the financial
statements. Materiality provides a basis for determining the nature
and extent of our audit procedures.
We determined materiality for the
Group to be $78.4 million (2023: $76.8million), which is 2% (2023:
2%) of net assets. We believe that net assets provides us with a
basis for determining the nature, timing and extent of risk
assessment procedures, identifying and assessing the risk of
material misstatement and determining the nature, timing and extent
of further audit procedures. We used the net assets as a basis for
determining planning materiality because the Group's primary
performance measures for internal and external reporting are based
on net assets as we consider it is the measure most relevant to the
stakeholders of the Group.
During the course of our audit, we
reassessed initial materiality from the planning stage based on 31
January 2024 net assets.
Performance Materiality
The application of materiality at the individual account or
balance level. It is set at an amount to reduce to an appropriately
low level the probability that the aggregate of uncorrected and
undetected misstatements exceeds materiality.
On the basis of our risk
assessments, together with our assessment of the Group's overall
control environment, our judgement was that performance materiality
was 75% (2023: 75%) of our planning materiality, namely $58.8m
(2023: $57.6m). We have set performance materiality at this
percentage given that there is no history of material
misstatements, the likelihood of misstatement in the future is
deemed low, we have a strong understanding of the control
environment, there were no changes in circumstances (such as a
change in accounting personnel or events out of the normal course
of business) and it is not a close monitored audit, and hence we
consider 75% to be reasonable.
Reporting Threshold
An amount below which identified misstatements are considered
as being clearly trivial.
We agreed with the Audit Committee
that we would report to them all uncorrected audit differences in
excess of $3.9m (2023: $3.8m), which is set at 5% of planning
materiality, as well as differences below that threshold that, in
our view, warranted reporting on qualitative grounds.
We evaluate any uncorrected
misstatements against both the quantitative measures of materiality
discussed above and in light of other relevant qualitative
considerations in forming our opinion.
Other Information
The other information comprises the
information included in the annual report other than the
Consolidated Financial Statements and our auditor's report thereon.
The directors are responsible for the other information contained
within the annual report.
Our opinion on the Consolidated
Financial Statements does not cover the other information and,
except to the extent otherwise explicitly stated in this report, we
do not express any form of assurance conclusion thereon.
Our responsibility is to read the
other information and, in doing so, consider whether the other
information is materially inconsistent with the Consolidated
Financial Statements or our knowledge obtained in the course of the
audit or otherwise appears to be materially misstated. If we
identify such material inconsistencies or apparent material
misstatements, we are required to determine whether this gives rise
to a material misstatement in the Consolidated Financial Statements
themselves. If, based on the work we have performed, we conclude
that there is a material misstatement of the other information, we
are required to report that fact.
We have nothing to report in this
regard.
Matters on Which We Are Required To Report by
Exception
We have nothing to report in
respect of the following matters in relation to which The Companies
(Guernsey) Law, 2008 requires us to report to you if, in our
opinion:
> proper accounting records have
not been kept by the Company; or
> the Financial Statements are
not in agreement with the Company's accounting records and returns;
or
> we have not received all the
information and explanations we require for our audit.
Corporate Governance Statement
We have reviewed the directors'
statement in relation to going concern, longer-term viability and
that part of the Corporate Governance Statement relating to the
group and company's compliance with the provisions of the UK
Corporate Governance Code specified for our review by the Listing
Rules.
Based on the work undertaken as
part of our audit, we have concluded that each of the following
elements of the Corporate Governance Statement is materially
consistent with the financial statements or our knowledge obtained
during the audit:
> Directors' statement with
regards to the appropriateness of adopting the going concern basis
of accounting and any material uncertainties identified set out on
pages 71 to 73;
> Directors' explanation as to
its assessment of the company's prospects, the period this
assessment covers and why the period is appropriate set out on
pages 71 to 73;
> Director's statement on
whether it has a reasonable expectation that the group will be able
to continue in operation and meets its liabilities set out on pages
71 to 73;
> Directors' statement on fair,
balanced and understandable set out on page 73;
> Board's confirmation that it
has carried out a robust assessment of the emerging and principal
risks set out on pages 40 to 43;
> The section of the annual
report that describes the review of effectiveness of risk
management and internal control systems set out on page 78;
and;
> The section describing the
work of the audit committee set out on pages 77 to 79.
Responsibilities of Directors
As explained more fully in the
directors' responsibilities statement set out on page 73, the
Directors are responsible for the preparation of the Consolidated
Financial Statements and for being satisfied that they give a true
and fair view, and for such internal control as the Directors
determine is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to
fraud or error.
In preparing the Consolidated
Financial Statements, the Directors are responsible for assessing
the Group and Company's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and
using the going concern basis of accounting unless the Directors
either intend to liquidate the Group or the Company or to cease
operations, or have no realistic alternative but to do
so.
Auditor's Responsibilities for the Audit of the Financial
Statements
Our objectives are to obtain
reasonable assurance about whether the Consolidated financial
statements as a whole are free from material misstatement, whether
due to fraud or error, and to issue an auditor's report that
includes our opinion. Reasonable assurance is a high level of
assurance, but is not a guarantee that an audit conducted in
accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or
error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these financial
statements.
Explanation as to what extent the audit was considered capable
of detecting irregularities, including fraud
Irregularities, including fraud,
are instances of non-compliance with laws and regulations. We
design procedures in line with our responsibilities, outlined
above, to detect irregularities, including fraud. The risk of not
detecting a material misstatement due to fraud is higher than the
risk of not detecting one resulting from error, as fraud may
involve deliberate concealment by, for example, forgery or
intentional misrepresentations, or through collusion. The extent to
which our procedures are capable of detecting irregularities,
including fraud is detailed below.
However, the primary responsibility
for the prevention and detection of fraud rests with both those
charged with governance of the company and management.
> We obtained an understanding
of the legal and regulatory frameworks that are applicable to the
Group and determined that the most significant are:
- Financial Conduct Authority
("FCA") Listing Rules;
- Disclosure Guidance and
Transparency Rules ("DTR") of the FCA;
- The 2018 UK Corporate Governance
Code;
- The 2019 AIC Code of Corporate
Governance;
- The Companies (Guernsey) Law,
2008, as amended.
> We understood how Group is
complying with those frameworks by:
- Discussing the processes and
procedures used by the Directors, the Investment Manager, the
Company Secretary and Administrator to ensure compliance with the
relevant frameworks;
- Inspecting the Group's relevant
documented policies, processes and procedures; and
- Reviewing internal reports that
evidence compliance testing.
> We assessed the susceptibility
of the Group's Consolidated Financial Statements to material
misstatement, including how fraud might occur by:
- Identifying misstatement or
manipulation of the valuation of the Group's investments in the
HarbourVest funds and undertaking the audit procedures set out in
the Key Audit Matters section above;
- Obtaining an understanding of
entity-level controls and considering the influence of the control
environment;
- Obtaining management's assessment
of fraud risks including an understanding of the nature, extent and
frequency of such assessment documented in the HVPE Risk
Review;
- Making inquiries with those
charged with governance as to how they exercise oversight of
management's processes for identifying and responding to fraud
risks and the controls established by management to mitigate
specifically those risks the entity has identified, or that
otherwise help to prevent, deter and detect fraud;
- Making inquiries with management
and those charged with governance regarding how they identify
related parties including circumstances related to the existence of
a related party with dominant influence; and
- Making inquiries with management
and those charged with governance regarding their knowledge of any
actual or suspected fraud or allegations of fraudulent financial
reporting affecting the Group.
> Based on this understanding we
designed our audit procedures to identify non-compliance with such
laws and regulations. Our procedures involved:
- Having discussions with those
charged with governance, the Investment Manager, the Company
Secretary and Administrator to obtain an understanding of how
instances of non-compliance with relevant laws and regulations are
identified;
- Reviewing Board minutes and
internal compliance reporting;
- Inspecting correspondence with
regulators;
- Reviewing the Consolidated
Financial Statements to check that they comply with the reporting
requirements of the Group;
- Obtaining relevant written
representations from the Board of Directors; and
- Performing journal entry
testing.
A further description of our
responsibilities for the audit of the financial statements is
located on the Financial Reporting Council's website at
https://www.frc.org.uk/auditorsresponsibilities. This description
forms part of our auditor's report.
Other Matters We are Required to Address
> Following the recommendation
from the audit committee we were appointed by the Company on 2
November 2007 to audit the financial statements for the year ending
31 January 2008 and subsequent financial periods. The period of
total uninterrupted engagement including previous renewals and
reappointments is 17 years, covering the years ending 31 January
2008 to 31 January 2024.
> The audit opinion is
consistent with the additional report to the Audit and Risk
Committee.
Use of Our Report
This report is made solely to the
company's members, as a body, in accordance with Section 262 of The
Companies (Guernsey) law 2008. Our audit work has been undertaken
so that we might state to the Company's members those matters we
are required to state to them in an auditor's report and for no
other purpose. To the fullest extent permitted by law, we do not
accept or assume responsibility to anyone other than the company
and the company's members as a body, for our audit work, for this
report, or for the opinions we have formed.
Richard Geoffrey Le Tissier
For and on behalf of Ernst &
Young LLP
Guernsey
29 May 2024
Notes:
1. The maintenance and integrity of
the Company's website is the sole responsibility of the Directors;
the work carried out by the auditors does not involve consideration
of these matters and, accordingly, the auditor accepts no
responsibility for any changes that may have occurred to the
Financial Statements since they were initially presented on the
website.
2. Legislation in Guernsey
governing the preparation and dissemination of Financial Statements
may differ from legislation in other jurisdictions.
Report of Independent Auditors
To the Directors of HarbourVest
Global Private Equity Limited
Opinion
We have audited the consolidated
financial statements of HarbourVest Global Private Equity Limited
(the "Company") and its subsidiaries (together the "Group"), which
comprise the consolidated statements of assets and liabilities,
including the consolidated schedules of investments, as of 31
January 2024 and 2023, and the related consolidated statements of
operations, changes in net assets, and cash flows for the years
then ended, and the related notes 1 to 12 (collectively referred to
as the "financial statements").
In our opinion, the accompanying
financial statements present fairly, in all material respects, the
financial position of the Group at 31 January 2024 and 2023, and
the results of its operations, changes in its net assets and its
cash flows for the year then ended in accordance with accounting
principles generally accepted in the United States of
America.
Basis for Opinion
We conducted our audit in
accordance with auditing standards generally accepted in the United
States of America (GAAS). Our responsibilities under those
standards are further described in the Auditor's Responsibilities
for the Audit of the Financial Statements section of our report. We
are required to be independent of the Group and to meet our other
ethical responsibilities in accordance with the relevant ethical
requirements relating to our audit. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide
a basis for our audit opinion.
Responsibilities of Management for the Financial
Statements
Management is responsible for the
preparation and fair presentation of the financial statements in
accordance with accounting principles generally accepted in the
United States of America, and for the design, implementation, and
maintenance of internal control relevant to the preparation and
fair presentation of financial statements that are free of material
misstatement, whether due to fraud or error.
In preparing the financial
statements, management is required to evaluate whether there are
conditions or events, considered in the aggregate, that raise
substantial doubt about the Group's ability to continue as a going
concern for one year after the date that the financial statements
are available to be issued.
Auditor's Responsibilities for the Audit of the Financial
Statements
Our objectives are to obtain
reasonable assurance about whether the financial statements as a
whole are free of material misstatement, whether due to fraud or
error, and to issue an auditor's report that includes our opinion.
Reasonable assurance is a high level of assurance but is not
absolute assurance and therefore is not a guarantee that an audit
conducted in accordance with GAAS will always detect a material
misstatement when it exists. The risk of not detecting a material
misstatement resulting from fraud is higher than for one resulting
from error, as fraud may involve collusion, forgery, intentional
omissions, misrepresentations, or the override of internal control.
Misstatements are considered material if there is a substantial
likelihood that, individually or in the aggregate, they would
influence the judgment made by a reasonable user based on the
financial statements.
In performing an audit in
accordance with GAAS, we:
> Exercise professional judgment
and maintain professional skepticism throughout the
audit.
> Identify and assess the risks
of material misstatement of the financial statements, whether due
to fraud or error, and design and perform audit procedures
responsive to those risks. Such procedures include examining, on a
test basis, evidence regarding the amounts and disclosures in the
financial statements.
> Obtain an understanding of
internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for
the purpose of expressing an opinion on the effectiveness of the
Group's internal control. Accordingly, no such opinion is
expressed.
> Evaluate the appropriateness
of accounting policies used and the reasonableness of significant
accounting estimates made by management, as well as evaluate the
overall presentation of the financial statements.
> Conclude whether, in our
judgment, there are conditions or events, considered in the
aggregate, that raise substantial doubt about the Group's ability
to continue as a going concern for a reasonable period of
time.
We are required to communicate with
those charged with governance regarding, among other matters, the
planned scope and timing of the audit, significant audit findings,
and certain internal control-related matters that we identified
during the audit.
Other Information
Management is responsible for the
other information. The other information comprises the Strategic
Report, Governance, and Other Information but does not include the
financial statements and our auditor's report thereon. Our opinion
on the financial statements does not cover the other information,
and we do not express an opinion or any form of assurance
thereon.
In connection with our audit of the
financial statements, our responsibility is to read the other
information and consider whether a material inconsistency exists
between the other information and the financial statements, or the
other information otherwise appears to be materially misstated. If,
based on the work performed, we conclude that an uncorrected
material misstatement of the other information exists, we are
required to describe it in our report.
Guernsey, Channel
Islands
29 May 2024
Consolidated Statements of Assets and
Liabilities
At 31 January 2024 and
2023
|
In US Dollars
|
|
2024
(in thousands*)
|
|
2023
(in thousands*)
|
|
Assets
|
|
|
|
|
|
Investments (Note 4)
|
|
4,057,606
|
|
3,616,330
|
|
Cash and equivalents
|
|
140,156
|
|
197,523
|
|
Other assets
|
|
5,329
|
|
25,652
|
|
Total assets
|
|
4,203,091
|
|
3,839,505
|
|
Liabilities
|
|
|
|
|
|
Amounts due under the credit
facility (Note 6)
|
|
275,000
|
|
-
|
|
Accounts payable and accrued
expenses
|
|
7,479
|
|
1,441
|
|
Accounts payable to HarbourVest
Advisers L.P. (Note 9)
|
|
40
|
|
138
|
|
Total liabilities
|
|
282,519
|
|
1,579
|
|
Commitments (Note 5)
|
|
|
|
|
|
Net assets
|
|
$3,920,572
|
|
$3,837,926
|
|
Net assets consist of
|
|
|
|
|
|
Shares, unlimited shares
authorised, 77,683,508 and 79,104,622 shares issued and outstanding
at 31 January 2024 and 31 January 2023 respectively, no par
value
|
|
3,920,572
|
|
3,837,926
|
|
Net assets
|
|
$3,920,572
|
|
$3,837,926
|
|
Net asset value per
share
|
|
$50.47
|
|
$48.52
|
* Except net asset value per
share
The accompanying notes are an
integral part of the Financial Statements.
The Financial Statements on pages
93 to 100 were approved by the Board on 29 May 2024 and were signed
on its behalf by:
|
Ed
Warner
Chair
|
Steven Wilderspin
Chair of the Audit and Risk Committee
|
Consolidated Statements of Operations
For the Years Ended 31 January 2024
and 2023
|
In US Dollars
|
|
2024
(in thousands)
|
|
2023
(in thousands)
|
|
Realised and unrealised gains (losses) on
investments
|
|
|
|
|
|
Net realised gain on
investments
|
|
90,514
|
|
236,752
|
|
Net change in unrealised
appreciation and depreciation on investments
|
|
49,893
|
|
(291,301)
|
|
Net gain (loss) on investments
|
|
140,407
|
|
(54,549)
|
|
Investment income
|
|
|
|
|
|
Interest and dividends from cash
and equivalents
|
|
8,621
|
|
3,622
|
|
Other income
|
|
186
|
|
71
|
|
Expenses
|
|
|
|
|
|
Interest expense (Note
6)
|
|
14,465
|
|
-
|
|
Non-utilisation fees (Note
6)
|
|
6,127
|
|
7,078
|
|
Investment services (Note
3)
|
|
2,475
|
|
2,021
|
|
Financing expenses
|
|
2,374
|
|
2,455
|
|
Professional fees
|
|
1,118
|
|
975
|
|
Directors' fees and expenses (Note
9)
|
|
474
|
|
526
|
|
Marketing expenses
|
|
356
|
|
288
|
|
Management fees (Note 3)
|
|
117
|
|
384
|
|
Tax expenses
|
|
47
|
|
7
|
|
Other expenses
|
|
513
|
|
633
|
|
Total expenses
|
|
28,066
|
|
14,367
|
|
Net investment loss
|
|
(19,259)
|
|
(10,674)
|
|
Net increase (decrease) in net assets resulting from
operations
|
|
$121,148
|
|
$(65,223)
|
The accompanying notes are an
integral part of the Financial Statements.
Consolidated Statements of Changes in Net
Assets
For the Years Ended 31 January 2024
and 2023
|
In US Dollars
|
|
2024
(in thousands)
|
|
2023
(in thousands)
|
|
Increase (decrease) in net assets from
operations
|
|
|
|
|
|
Net realised gain on
investments
|
|
90,514
|
|
236,752
|
|
Net change in unrealised
appreciation and depreciation on investments
|
|
49,893
|
|
(291,301)
|
|
Net investment loss
|
|
(19,259)
|
|
(10,674)
|
|
Net increase (decrease) in net
assets resulting from operations
|
|
121,148
|
|
(65,223)
|
|
Capital Share Transactions
|
|
|
|
|
|
Share Repurchase
|
|
(38,502)
|
|
(18,784)
|
|
Net decrease in net assets from
capital share transactions
|
|
(38,502)
|
|
(18,784)
|
|
Total increase (decrease) in net assets
|
|
82,646
|
|
(84,007)
|
|
Net assets at beginning of year
|
|
3,837,926
|
|
3,921,933
|
|
Net assets at end of year
|
|
$3,920,572
|
|
$3,837,926
|
The accompanying notes are an
integral part of the Financial Statements.
Consolidated Statements of Cash Flows
For the Years Ended 31 January 2024
and 2023
|
In US Dollars
|
|
2024
(in thousands)
|
|
2023
(in thousands)
|
|
Cash flows from operating activities
|
|
|
|
|
|
Net increase (decrease) in net
assets resulting from operations
|
|
121,148
|
|
(65,223)
|
|
Adjustments to reconcile net
increase (decrease) in net assets resulting from operations
to net cash used in operating activities:
|
|
|
|
|
|
Net realised gain on
investments
|
|
(90,514)
|
|
(236,752)
|
|
Net change in unrealised
appreciation and depreciation on investments
|
|
(49,893)
|
|
291,301
|
|
Contributions to private equity
investments
|
|
(592,792)
|
|
(704,903)
|
|
Distributions from private equity
investments
|
|
310,296
|
|
667,385
|
|
Other
|
|
7,890
|
|
(19,524)
|
|
Net cash used in operating
activities
|
|
(293,865)
|
|
(67,716)
|
|
Cash flows from financing activities
|
|
|
|
|
|
Proceeds from borrowing on the
credit facility
|
|
275,000
|
|
-
|
|
Share Repurchase
|
|
(38,502)
|
|
(18,784)
|
|
Net cash provided by (used in)
financing activities
|
|
236,498
|
|
(18,784)
|
|
Net decrease in cash and equivalents
|
|
(57,367)
|
|
(86,500)
|
|
Cash and equivalents at beginning of year
|
|
197,523
|
|
284,023
|
|
Cash and equivalents at end of year
|
|
$140,156
|
|
$197,523
|
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 Financial Statements.
Consolidated Schedule of Investments
At 31 January 2024
|
In US Dollars
|
|
|
|
|
|
|
|
|
|
|
|
US
Funds
|
|
Unfunded Commitment
(in thousands)
|
|
Amount
Invested*
(in thousands)
|
|
Distributions Received
(in thousands)
|
|
Fair Value
(in thousands)
|
|
Fair Value as a % of Net
Assets
|
|
HarbourVest Partners V-Partnership
Fund L.P.
|
|
2,220
|
|
46,709
|
|
45,924
|
|
802
|
|
0.0
|
|
HarbourVest Partners VI-Direct Fund
L.P.
|
|
1,313
|
|
46,722
|
|
41,081
|
|
1,796
|
|
0.0
|
|
HarbourVest Partners VI-Partnership
Fund L.P.
|
|
5,175
|
|
204,623
|
|
237,227
|
|
464
|
|
0.0
|
|
HarbourVest Partners VII-Venture
Partnership Fund L.P.†
|
|
2,319
|
|
135,290
|
|
204,327
|
|
2,127
|
|
0.1
|
|
HarbourVest Partners VIII-Cayman
Mezzanine and Distressed Debt Fund L.P.
|
|
2,000
|
|
48,202
|
|
62,811
|
|
699
|
|
0.0
|
|
HarbourVest Partners VIII-Cayman
Buyout Fund L.P.
|
|
7,500
|
|
245,259
|
|
417,067
|
|
4,931
|
|
0.1
|
|
HarbourVest Partners VIII-Cayman
Venture Fund L.P.
|
|
1,000
|
|
49,192
|
|
91,307
|
|
13,875
|
|
0.4
|
|
HarbourVest Partners 2007 Cayman
Direct Fund L.P.
|
|
2,250
|
|
97,877
|
|
165,442
|
|
288
|
|
0.0
|
|
HarbourVest Partners IX-Cayman
Buyout Fund L.P.
|
|
8,520
|
|
62,761
|
|
92,387
|
|
43,194
|
|
1.1
|
|
HarbourVest Partners IX-Cayman
Credit Opportunities Fund L.P.
|
|
1,438
|
|
11,111
|
|
12,034
|
|
6,029
|
|
0.2
|
|
HarbourVest Partners IX-Cayman
Venture Fund L.P.
|
|
3,500
|
|
66,826
|
|
132,015
|
|
84,464
|
|
2.2
|
|
HarbourVest Partners 2013 Cayman
Direct Fund L.P.
|
|
3,229
|
|
97,131
|
|
159,293
|
|
36,077
|
|
0.9
|
|
HarbourVest Partners Cayman
Cleantech Fund II L.P.
|
|
900
|
|
19,156
|
|
18,730
|
|
17,466
|
|
0.4
|
|
HarbourVest Partners X Buyout
Feeder Fund L.P.
|
|
34,650
|
|
217,378
|
|
165,062
|
|
233,547
|
|
6.0
|
|
HarbourVest Partners X Venture
Feeder Fund L.P.
|
|
6,290
|
|
141,764
|
|
99,019
|
|
258,319
|
|
6.6
|
|
HarbourVest Partners Mezzanine
Income Fund L.P.
|
|
8,155
|
|
42,067
|
|
63,788
|
|
20,675
|
|
0.5
|
|
HarbourVest Partners XI Buyout
Feeder Fund L.P.
|
|
90,300
|
|
259,700
|
|
82,013
|
|
324,967
|
|
8.3
|
|
HarbourVest Partners XI Micro
Buyout Feeder Fund L.P.
|
|
5,655
|
|
59,345
|
|
19,811
|
|
73,692
|
|
1.9
|
|
HarbourVest Partners XI Venture
Feeder Fund L.P.
|
|
13,300
|
|
176,736
|
|
42,421
|
|
236,782
|
|
6.0
|
|
HarbourVest Adelaide Feeder
L.P.
|
|
6,000
|
|
144,000
|
|
176,644
|
|
1,455
|
|
0.0
|
|
HarbourVest Partners XII Buyout
Feeder Fund L.P.
|
|
356,400
|
|
138,600
|
|
3,268
|
|
164,565
|
|
4.2
|
|
HarbourVest Partners XII Micro
Buyout Feeder Fund L.P.
|
|
58,000
|
|
22,000
|
|
-
|
|
24,486
|
|
0.6
|
|
HarbourVest Partners XII Venture
Feeder Fund L.P.
|
|
100,238
|
|
34,763
|
|
240
|
|
39,087
|
|
1.0
|
|
HarbourVest Partners XII Venture
AIF SCSp
|
|
95,450
|
|
19,625
|
|
-
|
|
23,431
|
|
0.6
|
|
Harbourvest Infrastructure Income
Delaware Parallel Partnership
|
|
-
|
|
117,233
|
|
37,964
|
|
104,241
|
|
2.7
|
|
Total US Funds
|
|
815,802
|
|
2,504,070
|
|
2,369,876
|
|
1,717,458
|
|
43.8
|
Consolidated Schedule of Investments
continued
|
International/Global Funds
|
|
Unfunded Commitment
(in thousands)
|
|
Amount
Invested*
(in thousands)
|
|
Distributions Received
(in thousands)
|
|
Fair Value
(in thousands)
|
|
Fair Value as a % of Net Assets
|
|
HarbourVest International Private
Equity Partners III-Partnership Fund L.P.
|
|
3,450
|
|
147,729
|
|
148,440
|
|
402
|
|
0.0
|
|
Dover Street VII Cayman
L.P.
|
|
4,250
|
|
83,504
|
|
118,312
|
|
122
|
|
0.0
|
|
HIPEP VI-Cayman Partnership Fund
L.P.**
|
|
5,409
|
|
117,845
|
|
177,872
|
|
56,878
|
|
1.5
|
|
HIPEP VI-Cayman Asia Pacific Fund
L.P.
|
|
2,500
|
|
47,687
|
|
59,275
|
|
19,589
|
|
0.5
|
|
HIPEP VI-Cayman Emerging Markets
Fund L.P.
|
|
-
|
|
30,059
|
|
15,319
|
|
22,461
|
|
0.6
|
|
Dover Street VIII Cayman
L.P.
|
|
14,400
|
|
165,724
|
|
262,515
|
|
13,083
|
|
0.3
|
|
HVPE Charlotte Co-Investment
L.P.
|
|
-
|
|
93,894
|
|
162,267
|
|
831
|
|
0.0
|
|
HarbourVest Global Annual Private
Equity Fund L.P.
|
|
9,000
|
|
91,001
|
|
137,497
|
|
74,761
|
|
1.9
|
|
HIPEP VII Partnership Feeder Fund
L.P.
|
|
10,625
|
|
114,375
|
|
116,405
|
|
127,623
|
|
3.3
|
|
HIPEP VII Asia Pacific Feeder Fund
L.P.
|
|
1,500
|
|
28,500
|
|
21,232
|
|
29,525
|
|
0.8
|
|
HIPEP VII Emerging Markets Feeder
Fund L.P.
|
|
2,600
|
|
17,400
|
|
8,267
|
|
22,389
|
|
0.6
|
|
HIPEP VII Europe Feeder
Fund
L.P. ††
|
|
6,815
|
|
64,329
|
|
79,077
|
|
68,485
|
|
1.7
|
|
HarbourVest Canada Parallel Growth
Fund L.P.‡‡
|
|
4,369
|
|
19,872
|
|
13,707
|
|
26,735
|
|
0.7
|
|
HarbourVest 2015 Global Fund
L.P.
|
|
7,000
|
|
93,017
|
|
114,791
|
|
74,638
|
|
1.9
|
|
HarbourVest 2016 Global AIF
L.P.
|
|
16,000
|
|
84,026
|
|
85,450
|
|
77,026
|
|
2.0
|
|
HarbourVest Partners Co-Investment
IV AIF L.P.
|
|
7,000
|
|
93,000
|
|
92,953
|
|
84,382
|
|
2.2
|
|
Dover Street IX Cayman
L.P.
|
|
12,000
|
|
88,000
|
|
91,612
|
|
60,234
|
|
1.5
|
|
HarbourVest Real Assets III Feeder
L.P.
|
|
3,750
|
|
46,250
|
|
13,607
|
|
47,312
|
|
1.2
|
|
HarbourVest 2017 Global AIF
L.P.
|
|
19,500
|
|
80,521
|
|
62,587
|
|
87,239
|
|
2.2
|
|
HIPEP VIII Partnership AIF
L.P.
|
|
28,475
|
|
141,525
|
|
36,116
|
|
175,297
|
|
4.5
|
|
Secondary Overflow Fund III
L.P.
|
|
22,841
|
|
62,316
|
|
59,234
|
|
62,341
|
|
1.6
|
|
HarbourVest Asia Pacific VIII AIF
Fund L.P.
|
|
3,375
|
|
46,631
|
|
11,092
|
|
50,461
|
|
1.3
|
|
HarbourVest 2018 Global Feeder Fund
L.P.
|
|
13,300
|
|
56,700
|
|
21,628
|
|
75,861
|
|
1.9
|
|
HarbourVest Partners Co-Investment
V Feeder Fund L.P.
|
|
22,500
|
|
77,548
|
|
19,777
|
|
124,512
|
|
3.2
|
|
HarbourVest Real Assets IV Feeder
L.P.
|
|
13,500
|
|
36,500
|
|
11,664
|
|
39,390
|
|
1.0
|
|
HarbourVest 2019 Global Feeder Fund
L.P.
|
|
26,000
|
|
74,007
|
|
15,885
|
|
99,459
|
|
2.5
|
|
HarbourVest Credit Opportunities
Fund II L.P.
|
|
1,500
|
|
48,500
|
|
8,939
|
|
49,891
|
|
1.3
|
|
Dover Street X Feeder Fund
L.P.
|
|
44,250
|
|
105,768
|
|
37,683
|
|
125,128
|
|
3.2
|
|
Secondary Overflow Fund IV
L.P.
|
|
49,931
|
|
79,475
|
|
26,807
|
|
87,813
|
|
2.2
|
|
HIPEP IX Feeder Fund
L.P.
|
|
329,800
|
|
155,208
|
|
11,752
|
|
177,838
|
|
4.5
|
|
HarbourVest 2020 Global Feeder Fund
L.P.
|
|
10,750
|
|
39,251
|
|
4,147
|
|
43,755
|
|
1.1
|
|
HarbourVest Partners Co-Investment
VI Feeder Fund L.P.
|
|
37,500
|
|
87,506
|
|
378
|
|
95,003
|
|
2.4
|
|
HarbourVest Asia Pacific 5 Feeder
Fund L.P.
|
|
255,000
|
|
45,000
|
|
-
|
|
37,406
|
|
1.0
|
|
HarbourVest 2021 Global Feeder Fund
L.P.
|
|
76,822
|
|
93,230
|
|
2,790
|
|
103,962
|
|
2.7
|
|
HarbourVest 2022 Global Feeder Fund
L.P.
|
|
71,000
|
|
29,000
|
|
1,185
|
|
36,161
|
|
0.9
|
|
Dover Street XI Feeder Fund
L.P.
|
|
207,500
|
|
42,500
|
|
-
|
|
57,126
|
|
1.5
|
|
HarbourVest Credit Opportunities
III Feeder Fund L.P.
|
|
75,000
|
|
-
|
|
-
|
|
(63)
|
|
0.0
|
|
HIPEP X Feeder Fund L.P.
|
|
125,000
|
|
-
|
|
-
|
|
964
|
|
0.0
|
|
HarbourVest Infrastructure
Opportunities III Feeder Fund L.P.
|
|
75,000
|
|
-
|
|
-
|
|
268
|
|
0.0
|
|
Secondary Overflow Fund V
L.P.
|
|
-
|
|
-
|
|
-
|
|
(75)
|
|
0.0
|
|
HarbourVest Partners Stewardship
Feeder Fund L.P.
|
|
30,888
|
|
4,166
|
|
-
|
|
3,938
|
|
0.1
|
|
HarbourVest Private Equity
Continuation Solutions Feeder Fund L.P
|
|
35,000
|
|
-
|
|
-
|
|
-
|
|
0.0
|
|
Total International/Global Funds
|
|
1,685,100
|
|
2,731,565
|
|
2,050,263
|
|
2,340,149
|
|
59.8
|
|
Total Investments
|
|
2,500,899
|
|
5,235,635
|
|
4,420,139
|
|
4,057,606
|
|
103.5
|
*
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
€47,450,000.
**
Fund denominated in euros. Commitment amount is
€100,000,000.
††
Fund denominated in euros. Commitment amount is
€63,000,000.
‡‡
Fund denominated in Canadian dollars. Commitment amount is
C$32,000,000.
As of 31 January 2024, the cost
basis of partnership investments is $2,696,155,000.
Totals and subtotals may not
recalculate due to rounding.
The accompanying notes are an
integral part of the Financial Statements.
Consolidated Schedule of Investments
At 31 January 2023
|
In US Dollars
|
|
|
|
|
|
|
|
|
|
|
|
US
Funds
|
|
Unfunded Commitment
(in thousands)
|
|
Amount
Invested*
(in thousands)
|
|
Distributions Received
(in thousands)
|
|
Fair Value
(in thousands)
|
|
Fair Value as a % of Net
Assets
|
|
HarbourVest Partners V-Partnership
Fund L.P.
|
|
2,220
|
|
46,709
|
|
45,924
|
|
816
|
|
0.0
|
|
HarbourVest Partners VI-Direct Fund
L.P.
|
|
1,313
|
|
46,722
|
|
40,882
|
|
260
|
|
0.0
|
|
HarbourVest Partners VI-Partnership
Fund L.P.
|
|
5,175
|
|
204,623
|
|
237,227
|
|
503
|
|
0.0
|
|
HarbourVest Partners VII-Venture
Partnership Fund
L.P. †
|
|
2,319
|
|
135,290
|
|
204,163
|
|
2,132
|
|
0.1
|
|
HarbourVest Partners VII-Buyout
Partnership Fund L.P. †
|
|
3,850
|
|
74,417
|
|
103,486
|
|
187
|
|
0.0
|
|
HarbourVest Partners VIII-Cayman
Mezzanine and Distressed Debt Fund L.P.
|
|
2,000
|
|
48,202
|
|
61,472
|
|
2,466
|
|
0.1
|
|
HarbourVest Partners VIII-Cayman
Buyout Fund L.P.
|
|
7,500
|
|
245,259
|
|
404,137
|
|
21,860
|
|
0.6
|
|
HarbourVest Partners VIII-Cayman
Venture Fund L.P.
|
|
1,000
|
|
49,192
|
|
88,651
|
|
15,883
|
|
0.4
|
|
HarbourVest Partners 2007 Cayman
Direct Fund L.P.
|
|
2,250
|
|
97,877
|
|
160,808
|
|
4,946
|
|
0.1
|
|
HarbourVest Partners IX-Cayman
Buyout Fund L.P.
|
|
10,473
|
|
60,808
|
|
84,303
|
|
49,417
|
|
1.3
|
|
HarbourVest Partners IX-Cayman
Credit Opportunities Fund L.P.
|
|
1,875
|
|
10,674
|
|
11,337
|
|
6,807
|
|
0.2
|
|
HarbourVest Partners IX-Cayman
Venture Fund L.P.
|
|
3,500
|
|
66,826
|
|
124,117
|
|
94,932
|
|
2.5
|
|
HarbourVest Partners 2013 Cayman
Direct Fund L.P.
|
|
3,229
|
|
97,131
|
|
148,459
|
|
51,604
|
|
1.3
|
|
HarbourVest Partners Cayman
Cleantech Fund II L.P.
|
|
900
|
|
19,156
|
|
16,143
|
|
18,984
|
|
0.5
|
|
HarbourVest Partners X Buyout
Feeder Fund L.P.
|
|
42,840
|
|
209,188
|
|
154,487
|
|
219,696
|
|
5.7
|
|
HarbourVest Partners X Venture
Feeder Fund L.P.
|
|
6,290
|
|
141,764
|
|
91,859
|
|
278,980
|
|
7.3
|
|
HarbourVest Partners Mezzanine
Income Fund L.P.
|
|
8,155
|
|
42,067
|
|
62,671
|
|
18,132
|
|
0.5
|
|
HarbourVest Partners XI Buyout
Feeder Fund L.P.
|
|
129,500
|
|
220,500
|
|
70,642
|
|
277,494
|
|
7.2
|
|
HarbourVest Partners XI Micro
Buyout Feeder Fund L.P.
|
|
19,955
|
|
45,045
|
|
18,490
|
|
55,692
|
|
1.5
|
|
HarbourVest Partners XI Venture
Feeder Fund L.P.
|
|
33,250
|
|
156,786
|
|
38,522
|
|
221,358
|
|
5.8
|
|
HarbourVest Adelaide Feeder
L.P.
|
|
6,000
|
|
144,000
|
|
176,644
|
|
1,320
|
|
0.0
|
|
HarbourVest Partners XII Buyout
Feeder Fund L.P.
|
|
457,875
|
|
37,125
|
|
-
|
|
42,754
|
|
1.1
|
|
HarbourVest Partners XII Micro
Buyout Feeder Fund L.P.
|
|
78,400
|
|
1,600
|
|
-
|
|
1,102
|
|
0.0
|
|
HarbourVest Partners XII Venture
Feeder Fund L.P.
|
|
122,175
|
|
12,825
|
|
-
|
|
13,122
|
|
0.3
|
|
HarbourVest Partners XII Venture
AIF SCSp
|
|
102,350
|
|
12,725
|
|
-
|
|
13,463
|
|
0.4
|
|
Harbourvest Infrastructure Income
Delaware Parallel Partnership
|
|
-
|
|
117,233
|
|
18,373
|
|
119,638
|
|
3.1
|
|
Total US Funds
|
|
1,054,393
|
|
2,343,743
|
|
2,362,798
|
|
1,533,549
|
|
40.0
|
Consolidated Schedule of Investments
continued
|
International/Global Funds
|
|
Unfunded Commitment
(in thousands)
|
|
Amount
Invested*
(in thousands)
|
|
Distributions Received
(in thousands)
|
|
Fair Value
(in thousands)
|
|
Fair Value as a % of
Net Assets
|
|
HarbourVest International Private
Equity Partners III-Partnership Fund L.P.
|
|
3,450
|
|
147,729
|
|
148,440
|
|
395
|
|
0.0
|
|
HIPEP V-2007 Cayman European Buyout
Companion Fund L.P.§
|
|
1,546
|
|
63,880
|
|
84,434
|
|
665
|
|
0.0
|
|
Dover Street VII Cayman
L.P.
|
|
4,250
|
|
83,504
|
|
117,756
|
|
775
|
|
0.0
|
|
HIPEP VI-Cayman Partnership Fund
L.P.**
|
|
5,432
|
|
117,845
|
|
163,073
|
|
73,196
|
|
1.9
|
|
HIPEP VI-Cayman Asia Pacific Fund
L.P.
|
|
2,500
|
|
47,687
|
|
55,840
|
|
26,154
|
|
0.7
|
|
HIPEP VI-Cayman Emerging Markets
Fund L.P.
|
|
-
|
|
30,059
|
|
12,151
|
|
24,542
|
|
0.6
|
|
Dover Street VIII Cayman
L.P.
|
|
14,400
|
|
165,724
|
|
255,442
|
|
21,677
|
|
0.6
|
|
HVPE Charlotte Co-Investment
L.P.
|
|
-
|
|
93,894
|
|
161,228
|
|
1,979
|
|
0.1
|
|
HarbourVest Global Annual Private
Equity Fund L.P.
|
|
11,300
|
|
88,701
|
|
128,959
|
|
79,433
|
|
2.1
|
|
HIPEP VII Partnership Feeder Fund
L.P.
|
|
14,688
|
|
110,313
|
|
94,516
|
|
137,579
|
|
3.6
|
|
HIPEP VII Asia Pacific Feeder Fund
L.P.
|
|
1,950
|
|
28,050
|
|
18,269
|
|
34,051
|
|
0.9
|
|
HIPEP VII Emerging Markets Feeder
Fund L.P.
|
|
2,600
|
|
17,400
|
|
7,385
|
|
21,462
|
|
0.6
|
|
HIPEP VII Europe Feeder
Fund
L.P. ††
|
|
9,411
|
|
61,749
|
|
62,637
|
|
75,215
|
|
2.0
|
|
HarbourVest Canada Parallel Growth
Fund L.P.‡‡
|
|
5,056
|
|
19,224
|
|
12,427
|
|
30,321
|
|
0.8
|
|
HarbourVest 2015 Global Fund
L.P.
|
|
8,500
|
|
91,517
|
|
106,979
|
|
81,507
|
|
2.1
|
|
HarbourVest 2016 Global AIF
L.P.
|
|
23,000
|
|
77,026
|
|
76,508
|
|
77,869
|
|
2.0
|
|
HarbourVest Partners Co-Investment
IV AIF L.P.
|
|
7,000
|
|
93,000
|
|
85,330
|
|
86,145
|
|
2.2
|
|
Dover Street IX Cayman
L.P.
|
|
13,000
|
|
87,000
|
|
88,613
|
|
63,361
|
|
1.7
|
|
HarbourVest Real Assets III Feeder
L.P.
|
|
3,750
|
|
46,250
|
|
9,121
|
|
52,457
|
|
1.4
|
|
HarbourVest 2017 Global AIF
L.P.
|
|
27,500
|
|
72,521
|
|
53,510
|
|
81,961
|
|
2.1
|
|
HIPEP VIII Partnership AIF
L.P.
|
|
49,725
|
|
120,275
|
|
28,926
|
|
154,277
|
|
4.0
|
|
Secondary Overflow Fund III
L.P.
|
|
24,214
|
|
68,876
|
|
66,304
|
|
68,707
|
|
1.8
|
|
HarbourVest Asia Pacific VIII AIF
Fund L.P.
|
|
8,250
|
|
41,756
|
|
8,000
|
|
50,108
|
|
1.3
|
|
HarbourVest 2018 Global Feeder Fund
L.P.
|
|
15,400
|
|
54,600
|
|
18,850
|
|
75,203
|
|
2.0
|
|
HarbourVest Partners Co-Investment
V Feeder Fund L.P.
|
|
22,500
|
|
77,548
|
|
15,940
|
|
123,382
|
|
3.2
|
|
HarbourVest Real Assets IV Feeder
L.P.
|
|
22,000
|
|
28,000
|
|
4,167
|
|
35,278
|
|
0.9
|
|
HarbourVest 2019 Global Feeder Fund
L.P.
|
|
36,000
|
|
64,007
|
|
13,621
|
|
87,489
|
|
2.3
|
|
HarbourVest Credit Opportunities
Fund II L.P.
|
|
2,500
|
|
47,500
|
|
2,710
|
|
50,745
|
|
1.3
|
|
Dover Street X Feeder Fund
L.P.
|
|
55,125
|
|
94,893
|
|
32,646
|
|
115,696
|
|
3.0
|
|
Secondary Overflow Fund IV
L.P.
|
|
57,573
|
|
71,833
|
|
24,776
|
|
78,578
|
|
2.1
|
|
HIPEP IX Feeder Fund
L.P.
|
|
388,000
|
|
97,008
|
|
7,095
|
|
120,489
|
|
3.1
|
|
HarbourVest 2020 Global Feeder Fund
L.P.
|
|
16,000
|
|
34,001
|
|
3,513
|
|
39,054
|
|
1.0
|
|
HarbourVest Partners Co-Investment
VI Feeder Fund L.P.
|
|
93,750
|
|
31,256
|
|
-
|
|
31,562
|
|
0.8
|
|
HarbourVest Asia Pacific 5 Feeder
Fund L.P.
|
|
291,000
|
|
9,000
|
|
-
|
|
7,756
|
|
0.2
|
|
HarbourVest 2021 Global Feeder Fund
L.P.
|
|
111,350
|
|
58,701
|
|
987
|
|
63,411
|
|
1.7
|
|
HarbourVest 2022 Global Feeder Fund
L.P.
|
|
97,000
|
|
3,000
|
|
-
|
|
4,323
|
|
0.1
|
|
Dover Street XI Feeder Fund
L.P.
|
|
225,000
|
|
-
|
|
-
|
|
5,979
|
|
0.2
|
|
HarbourVest Credit Opportunities
III Feeder Fund L.P.
|
|
75,000
|
|
-
|
|
-
|
|
-
|
|
-
|
|
Total International/Global Funds
|
|
1,749,720
|
|
2,445,329
|
|
1,970,152
|
|
2,082,782
|
|
54.3
|
|
Total Investments
|
|
2,804,113
|
|
4,789,072
|
|
4,332,950
|
|
3,616,330
|
|
94.3
|
*
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
€47,450,000.
**
Fund denominated in euros. Commitment amount is
€100,000,000.
††
Fund denominated in euros. Commitment amount is
€63,000,000.
‡‡
Fund denominated in Canadian dollars. Commitment amount is
C$32,000,000.
As of 31 January 2023, the cost
basis of partnership investments is $2,304,772,000.
Totals and subtotals may not
recalculate due to rounding.
The accompanying notes are an
integral part of the Financial Statements.
Notes to 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 intends 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 January 2024, the Company's
77,683,508 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. The Company repurchased
1,421,114 and 757,864 shares during the years ended 31 January 2024
and 31 January 2023, respectively.
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, balance sheet management, 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
The following accounting policies
have been applied consistently in dealing with items which are
considered material in relation to the Company's consolidated
financial statements ("Financial Statements").
Basis of Preparation
The Company maintains an
overcommitment strategy in an attempt to remain fully invested over
time (refer to Note 5 on page 105 for further details on unfunded
commitments). HarbourVest prepares forecasts and predictions to
provide assurance that the Company has sufficient resources to meet
its ongoing requirements.
As part of this process, the
Investment Manager has created four revised model scenarios with
varying degrees of decline in investment value and investment
distributions, with the worst being an Extreme Downside scenario
representing an impact to the portfolio that is worse than that
expected during the Global Financial Crisis ("GFC"). All four
models verified that the Company has enough resources to meet the
Company's upcoming financial obligations. However, in all
circumstances HVPE can take steps to limit or mitigate the impact
on the Consolidated Statements of Assets and Liabilities, namely
drawing on the credit facility, pausing new commitments, raising
additional credit or capital, and selling assets to increase
liquidity and reduce outstanding commitments. As a result, the
Company's Financial Statements have been prepared on a going
concern basis.
Basis of Presentation
The Financial Statements include
the accounts of HarbourVest Global Private Equity Limited and its
five wholly owned subsidiaries: HVGPE - Domestic A L.P., HVGPE -
Domestic B L.P., HVGPE - Domestic C L.P., HVGPE - International A
L.P. and HVGPE - International B L.P. (together "the
undertakings"). Each of the subsidiaries is a Cayman Islands
limited partnership formed to facilitate the purchase of certain
investments. All intercompany accounts and transactions have been
eliminated in consolidation.
Method of Accounting
The Financial Statements are
prepared in conformity with US generally accepted accounting
principles ("US GAAP"), The Companies (Guernsey) Law, 2008, and the
Principal Documents. Under applicable rules of Guernsey law
implementing the EU Transparency Directive, the Company is allowed
to prepare its financial statements in accordance with US GAAP
instead of International Financial Reporting Standards
("IFRS").
The Company is an investment
company following the accounting and reporting guidance of the
Financial Accounting Standards Boards ("FASB") Accounting Standards
Codification ("ASC") Topic 946 - Financial Services - Investment
Companies.
Estimates
The preparation of the Financial
Statements in conformity with US GAAP requires management to make
estimates and assumptions that affect the amounts reported in the
Financial Statements and accompanying notes. Actual results could
differ from those estimates.
Investments
Investments are stated at fair
value in accordance with the Company's investment valuation policy.
The Board has concluded specifically that climate change, including
physical and transition risks, does not have a material impact on
the recognition and separate measurement considerations of the
assets and liabilities of the Group in the financial statements as
of 31 January 2024, but recognises that climate change may have an
effect on the investments held in the underlying partnerships. The
inputs used to determine fair value include financial statements
provided by the investment partnerships which typically include
fair market value capital account balances. In reviewing the
underlying financial statements and capital account balances, the
Company considers compliance with ASC Topic 820 - Fair Value
Measurement, the currency in which the investment is denominated,
and other information deemed appropriate.
The fair value of the Company's
investments is primarily based on the most recently reported NAV
provided by the underlying Investment Manager as a practical
expedient under ASC Topic 820. This 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. This valuation does not necessarily reflect amounts
that might ultimately be realised from the investment and the
difference can be material.
Securities for which a public
market does exist are valued by the Company at quoted market prices
at the year-end date. Generally, the partnership investments have a
defined term and cannot be transferred without the consent of the
GP of the limited partnership in which the investment has been
made.
Foreign Currency Transactions
The currency in which the Company
operates is US dollars, which is also the presentation currency.
Transactions denominated in foreign currencies are recorded in the
local currency at the exchange rate in effect at the transaction
dates. Foreign currency investments, investment commitments, cash
and equivalents, and other assets and liabilities are translated at
the rates in effect at the year-end date. Foreign currency
translation gains and losses are included in realised and
unrealised gains (losses) on investments as incurred. The Company
does not segregate that portion of realised or unrealised gains and
losses attributable to foreign currency translation on
investments.
Cash and Equivalents
The Company considers all highly
liquid investments with an original maturity of three months or
less to be cash equivalents. The carrying amount included in the
Consolidated Statements of Assets and Liabilities for cash and
equivalents approximates their fair value. The Company maintains
bank accounts denominated in US dollars, in euros, and in pounds
sterling. The Company may invest excess cash balances in highly
liquid instruments such as certificates of deposit, sovereign debt
obligations of certain countries, and money market funds that are
highly rated by the credit rating agencies.
The associated credit risk of the
cash and equivalents is monitored by the Board and the Investment
Manager on a regular basis. The Board has authorised the Investment
Manager to manage the cash balances on a daily basis according to
the terms set out in the treasury policies created by the
Board.
Investment Income
Investment income includes interest
from cash and equivalents, dividends, and interest received from
certain investments due to subsequent fund closings. Dividends are
recorded when they are declared and interest is recorded when
earned.
Operating Expenses
Operating expenses include amounts
directly incurred by the Company as part of its operations, and do
not include amounts incurred from the operations of the investment
entities.
Net Realised Gains and Losses
on Investments
For investments in private equity
funds, the Company records its share of realised gains and losses
as reported by the Investment Manager, including fund-level related
expenses and management fees, and is net of any carry allocation.
Realised gains and losses are calculated as the difference between
proceeds received and the related cost of the
investment.
Net Change in Unrealised Appreciation and Depreciation on
Investments
For investments in private equity
funds, the Company records its share of change in unrealised gains
and losses as reported by the Investment Manager as an increase or
decrease in unrealised appreciation or depreciation of investments
and is net of any carry allocation. When an investment is realised,
the related unrealised appreciation or depreciation is recognised
as realised.
Income Taxes
The Company is registered in
Guernsey as a tax exempt company. The States of Guernsey Income Tax
Authority has granted the Company exemption from Guernsey income
tax under the provision of the Income Tax (Exempt Bodies)
(Guernsey) Ordinance 1989 and the Company will be charged an annual
exemption fee of £1,200 included as other expenses in the
Consolidated Statements of Operations. Income may be subject to
withholding taxes imposed by the US or other countries, which will
impact the Company's effective tax rate.
Investments made in entities that
generate US source income may subject the Company to certain US
federal and state income tax consequences. A US withholding tax at
the rate of 30% may be applied on the distributive share of any US
source dividends and interest (subject to certain exemptions) and
certain other income that is received directly or through one or
more entities treated as either partnerships or disregarded
entities for US federal income tax purposes. Furthermore,
investments made in entities that generate income that is
effectively connected with a US trade or business may also subject
the Company to certain US federal and state income tax
consequences. The US requires withholding on effectively connected
income for corporate partners at the rate of 21%. In addition, the
Company may also be subject to a branch profits tax which can be
imposed at a rate of up to 30% of any after-tax, effectively
connected income associated with a US trade or business. However,
no amounts have been accrued.
The Company accounts for income
taxes under the provisions of ASC Topic 740 - Income Taxes. This
standard establishes consistent thresholds as it relates to
accounting for income taxes. It defines the threshold for
recognising the benefits of tax-return positions in the financial
statements as "more-likely-than-not" to be sustained by the taxing
authority and requires measurement of a tax position meeting the
more-likely-than-not criterion, based on the largest benefit that
is more than 50% likely to be realised. For the year ended 31
January 2024, the Investment Manager has analysed the Company's
inventory of tax positions taken with respect to all applicable
income tax issues for all open tax years (in each respective
jurisdiction), and has concluded that no provision for income tax
is required in the Company's Financial Statements.
Shareholders in certain
jurisdictions may have individual tax consequences from ownership
of the Company's shares. The Company has not included the impact of
these tax consequences on the shareholders in these Financial
Statements.
Market and Other Risk Factors
The Company's investments are
subject to various risk factors including market price, credit,
interest rate, liquidity, and currency risk. Investments are based
primarily in the US, Europe, and Asia Pacific, and thus have
concentrations in such regions. The Company's investments are also
subject to the risks associated with investing in leveraged buyout
and venture capital transactions that are illiquid and non-publicly
traded. Such investments are inherently more sensitive to declines
in revenues and to increases in expenses that may occur due to
general downward swings in the world economy or other risk factors
including increasingly intense competition, rapid changes in
technology, changes in federal, state and foreign regulations, and
limited capital investments.
The Company is subject to credit
and liquidity risk to the extent any financial institution with
which it conducts business is unable to fulfil contracted
obligations on its behalf. Management monitors the financial
condition of those financial institutions and does not anticipate
any losses from these counterparties.
Note
3 Material Agreements and Related Fees
Administrative Agreement
The Company has retained BNP
Paribas S.A., Guernsey Branch ("BNP") as Company Secretary and
Administrator. Fees for these services are paid as invoiced by BNP
and include an administration fee of £50,000 per annum, a
secretarial fee of £60,000 per annum, a compliance services fee of
£15,000 per annum, ad-hoc service fees, and reimbursable expenses.
During the years ended 31 January 2024 and 2023, fees of $158,000
and $157,000, respectively, were incurred to BNP and are included
as other expenses in the Consolidated Statements of
Operations.
Registrar
The Company has retained Link Asset
Services (formerly 'Capita') as share registrar. Fees for this
service include a base fee of £15,500, plus other miscellaneous
expenses. During the years ended 31 January 2024 and 2023,
registrar fees of $19,000 and $19,000, respectively, were incurred
and are included as other expenses in the Consolidated Statements
of Operations.
Independent Auditor's Fees
For the years ended 31 January 2024
and 2023, auditor fees of $453,000 and $363,000 were accrued,
respectively, and are included in professional fees in the
Consolidated Statements of Operations. The 31 January 2024 figure
includes $326,000 relating to the 31 January 2024 annual audit fee
and $6,000 relating to the prior financial year's audit fee. The 31
January 2023 figure includes $269,000 relating to the 31 January
2023 annual audit fee and a credit of $17,000 relating to the prior
financial year's audit fee. In addition, the 31 January 2024 and
2023 figures include fees of $121,000 and $111,000, respectively,
for audit-related services due to the Auditor, Ernst & Young
LLP, conducting a review of the Interim Financial Statements for
each period end.
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 years ended 31 January 2024 and 2023,
reimbursements for services provided by the Investment Manager were
$2,475,000 and $2,021,000, respectively. As of 1 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, as an investor in the HarbourVest
funds, HVPE is charged the same management fees and is subject to
the same performance allocations as other investors in such
HarbourVest funds.
During the years ended 31 January
2024 and 2023, 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 years
ended 31 January 2024 and 2023. Management fees included in the
Consolidated Statements of Operations are shown in the table
below:
|
|
|
2024
(in thousands)
|
|
2023
(in thousands)
|
|
HVPE Charlotte
Co-Investment L.P.
|
|
$117
|
|
$384
|
For the years ended 31 January 2024
and 2023, management fees on the HVPE Charlotte Co-Investment L.P.
investment were calculated based on a weighted average effective
annual rate of 0.13% and 0.44% respectively, on capital originally
committed (0.13% and 0.44% respectively, 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
and depreciation 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 years ended 31 January
2024 and 2023, the Company made contributions of $592,792,000 and
$704,903,000, respectively, to Level 3 investments and received
distributions of $310,296,000 and $649,012,000, respectively, from
Level 3 investments. Please refer to Note 10 for further detail on
the non-cash activity during the prior year. As of 31 January 2024,
$4,057,606,000 of the Company's investments are classified as Level
3. As of 31 January 2023, $3,616,330,000 of the Company's
investments were classified as Level 3.
Note 5 Commitments
As of 31 January 2024, the Company
had unfunded investment commitments to other limited partnerships
of $2,500,899,000 which are payable upon notice by the partnerships
to which the commitments have been made. As of 31 January 2023, the
Company had unfunded investment commitments to other limited
partnerships of $2,804,113,000.
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 and again on 31 January 2023, 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 $1.5
million at 31 January 2024 and $2.3 million at 31 January 2023, 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 January 2024, the Company
had an agreement with Mitsubishi UFJ Trust and Banking Corporation,
New York Branch ("MUFG"), Credit Suisse AG, London Branch ("Credit
Suisse") and The Guardians of New Zealand Superannuation as manager
and administrator of the New Zealand Superannuation Fund ("New
Zealand Super") for the provision of a multi-currency revolving
credit facility (the "Facility") with a termination date no earlier
than August 2027, 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. On 15 August 2022,
the commitment was further increased by $100 million through New
Zealand Super as the lender.
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 and is 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 January 2024 and 31 January 2023,
there was $275,000,000 and no debt outstanding against the
Facility, respectively. For the years ended 31 January 2024 and
2023, interest of $14,465,000 and $0, respectively, was incurred.
Included in other assets at 31 January 2024 and 31 January 2023 are
deferred financing costs of $5,066,000 and $6,950,000,
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 years ended 31
January 2024 and 2023, $6,127,000 and $7,078,000, respectively, in
non-utilisation fees have been incurred.
Note 7 Financial Highlights
For the Years Ended 31 January 2024
and 2023
|
In US Dollars
|
|
2024
|
|
2023
|
|
Shares
|
|
|
|
|
|
Per share operating performance:
|
|
|
|
|
|
Net asset value, beginning of
period
|
|
$48.52
|
|
$49.11
|
|
Net realised and unrealised gains
(losses)
|
|
1.79
|
|
(0.70)
|
|
Net investment loss
|
|
(0.26)
|
|
(0.13)
|
|
Total from investment
operations
|
|
1.53
|
|
(0.83)
|
|
Net increase from repurchase of
Class A shares
|
|
0.42
|
|
0.24
|
|
Net asset value, end of
period
|
|
$50.47
|
|
$48.52
|
|
Market value, end of
period
|
|
$29.15*
|
|
$27.10*
|
|
Total return at net asset
value
|
|
4.0%
|
|
(1.2)%
|
|
Total return at market
value
|
|
7.6%
|
|
(27.3)%
|
|
Ratios to average net assets
|
|
|
|
|
|
Expenses†
|
|
0.72%
|
|
0.37%
|
|
Net investment loss
|
|
(0.50)%
|
|
(0.28)%
|
*
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 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 $40,000 and $138,000 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 January 2024 and 2023,
respectively.
Other income relates to income
received from a revenue sharing agreement entered into with the
HarbourVest Infrastructure Income Delaware Parallel Partnership
("HIIP") investment. Through such agreement, the Company is
entitled to 10% of the management fee revenue received by
HarbourVest from HIIP, provided that HarbourVest remains as HIIP's
exclusive investment manager.
Directors' fees and expenses,
primarily compensation, of $474,000 and $526,000 were incurred
during the years ended 31 January 2024 and 2023,
respectively.
Note 10 Investment Transaction
On 1 July 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 1 July 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 Financial
Statements, the Company has evaluated the effects, if any, of
events occurring after 31 January 2024 to 30 May 2024, the date
that the Financial Statements were signed.
The Company made the following
purchases of its ordinary shares for cancellation:
|
Date
|
|
Number of Shares
|
|
Amount Purchased (£)
|
|
1 February 2024
|
|
79,979
|
|
1,856,262
|
|
2 February 2024
|
|
114,912
|
|
2,704,877
|
|
5 February 2024
|
|
100,000
|
|
2,398,300
|
|
6 February 2024
|
|
30,533
|
|
734,063
|
|
7 February 2024
|
|
58,000
|
|
1,408,958
|
|
7 March 2024
|
|
34,730
|
|
821,237
|
|
8 March 2024
|
|
50,000
|
|
1,185,000
|
|
11 March 2024
|
|
50,000
|
|
1,182,500
|
|
12 March 2024
|
|
50,000
|
|
1,182,500
|
|
13 March 2024
|
|
50,000
|
|
1,182,500
|
|
18 March 2024
|
|
50,000
|
|
1,175,000
|
|
20 March 2024
|
|
46,000
|
|
1,071,175
|
|
Total
|
|
714,154
|
|
16,902,372
|
On March 13, 2024, the Company
initiated a draw of $50 million on the credit facility. On May 17,
2024, the Company drew an additional $40 million on the
facility.
There were no other events or
material transactions subsequent to 31 January 2024 that required
recognition or disclosure in the Consolidated Financial
Statements.
Alternative Performance Measures
Reconciliation of Share Price Discount to Net Asset Value per
Share
The share price discount to NAV per
share will vary depending on which NAV per share figure is used.
The discount referred to elsewhere in this report is calculated
using the live NAVs per share available in the market as at 31
January 2023 and 31 January 2024, those being the 31 December 2022
and 31 December 2023 estimates of $48.04 (sterling equivalent
£39.76) and $50.04 (sterling equivalent £39.31), respectively,
adjusted for GBP/USD foreign exchange movement, against share
prices of £22.10 at 31 January 2023 and £23.15 at 31 January
2024.
The table below outlines the
notional discounts to the share price at 31 January 2024, based on
the NAVs per share published after this date (31 January 2024
estimate and final). Movements between the published NAVs per share
for the same calendar date largely arise as further underlying fund
valuations are received, and as adjustments are made for public
markets, foreign exchange and operating expenses.
|
Date of NAV (estimate and
final)
|
|
NAV per Share
|
|
NAV Converted at 31 January 2024
GBP/USD Exchange Rate (1.2673)
|
|
Share Price
at 31 January
2024
|
|
Discount
to NAV
at 31 January
2024
|
|
Estimated NAV at 31 December
2023
(published 23 January 2024)
|
|
$50.04
|
|
£39.49
|
|
£23.15
|
|
41%
|
|
Estimated NAV at 31 January
2024
(published 22 February 2024)
|
|
$49.67
|
|
£39.19
|
|
£23.15
|
|
41%
|
|
Final NAV (US GAAP) at 31 January
2024
(published 30 May 2024)
|
|
$50.47
|
|
£39.82
|
|
£23.15
|
|
42%
|
Annualised Outperformance of FTSE AW TR Index Over the Last 10
Years
|
NAV (US dollar) Compound Annual
Growth Rate ("CAGR")
|
|
|
|
31 January 2014
|
|
$14.38
|
|
31 January 2024
|
|
$50.47
|
|
Elapsed time (years)
|
|
10
|
|
US dollar CAGR
|
|
13.4%
|
|
|
|
|
|
FTSE AW TR Index (US dollar)
CAGR
|
|
|
|
31 January 2014
|
|
305.00
|
|
31 January 2024
|
|
725.17
|
|
Elapsed time (years)
|
|
10
|
|
FTSE AW TR CAGR
|
|
9.0%
|
|
|
|
|
|
Annualised outperformance of FTSE
AW TR Index Over the Last 10 Years calculation
|
|
|
|
13.4% minus 9.0%
|
|
4.33 percentage points ("pp")1
|
1
Due to rounding, please note this figure does not cast correctly on
the page from the respective figures above it (4.3pp displayed vs.
4.4pp if subtracting the numbers on this page). No number has been
re-rounded up nor down to ensure it casts correctly on the page,
thus preserving each component's true accuracy given its impact on
various other parts of the report
KPIs (pages 26 to 27)
The KPI metrics show the movement
between the NAV per share (in US dollars) and the share price in
sterling and translated into US dollars. Relative to the FTSE AW TR
Index, this is the difference in movement between the year-on-year
change of this index vs the particular HVPE KPI.
NAV Per Share ($) & Relative Performance
|
Date
|
|
NAV per Share
|
|
Absolute Performance
|
|
FTSE AW TR Index
Movement
|
|
Relative Performance vs FTSE AW
TR
|
|
31 January 2018
|
|
$21.46
|
|
16.2%
|
|
28.2%
|
|
-12.0pp
|
|
31 January 2019
|
|
$24.09
|
|
12.3%
|
|
-7.1%
|
|
+19.3pp
|
|
31 January 2020
|
|
$27.58
|
|
14.5%
|
|
16.7%
|
|
-2.2pp
|
|
31 January 2021
|
|
$35.97
|
|
30.4%
|
|
17.4%
|
|
+13.0pp
|
|
31 January 2022
|
|
$49.11
|
|
36.5%
|
|
13.8%
|
|
+22.8pp
|
|
31 January 2023
|
|
$48.52
|
|
-1.2%
|
|
-7.3%
|
|
+6.1pp
|
|
31 January 2024
|
|
$50.47
|
|
4.0%
|
|
15.3%
|
|
-11.3pp
|
10-year Outperformance of FTSE AW TR
|
NAV (US dollar)
|
|
|
|
31 January 2014
|
|
$14.38
|
|
31 January 2024
|
|
$50.47
|
|
US
dollar total return
|
|
251%
|
|
|
|
|
|
FTSE AW TR (US dollar)
|
|
|
|
31 January 2014
|
|
305.02
|
|
31 January 2024
|
|
725.17
|
|
FTSE AW TR total return
|
|
138%
|
|
|
|
|
|
10-year outperformance of FTSE AW TR
calculation
|
|
113%
|
|
251% minus 138%
|
|
113 percentage points ("pp")
|
Total Shareholder Return (£)
|
Date
|
|
Share Price (£)
|
|
Period-on-period Change
|
|
31 January 2018
|
|
£12.52
|
|
+4.8%
|
|
31 January 2019
|
|
£14.26
|
|
+13.9%
|
|
31 January 2020
|
|
£18.36
|
|
+28.8%
|
|
31 January 2021
|
|
£18.70
|
|
+1.9%
|
|
31 January 2022
|
|
£27.75
|
|
+48.4%
|
|
31 January 2023
|
|
£22.10
|
|
-20.4%
|
|
31 January 2024
|
|
£23.15
|
|
4.8%
|
Total Commitment Ratio
|
(Total exposure to private markets investments as a percentage
of NAV)
|
|
31
January
2024 ($m)
|
|
31 January
2023 ($m)
|
|
Investment Portfolio
|
|
$4,058
|
|
$3,616
|
|
Investment Pipeline
|
|
$2,501
|
|
$2,804
|
|
Total
|
|
$6,559
|
|
$6,420
|
|
NAV
|
|
$3,921
|
|
$3,838
|
|
Total Commitment Ratio
|
|
167%
|
|
167%
|
Net Portfolio Cash Flow
|
(The difference between calls and distributions over the
reporting period)
|
|
31 January
2024 ($m)
|
|
31 January
2023
|
|
Calls
|
|
$(593)
|
|
$(588)
|
|
Distributions
|
|
$310
|
|
$532
|
|
Net Portfolio Cash Flow
|
|
$(283)
|
|
$(56)
|
Both "Total Commitment Ratio" and
"Net Portfolio Cash Flow" also form part of "Managing the Balance
Sheet".
Managing the Balance Sheet
Medium-term Coverage Ratio
|
(A
measure of medium-term commitment coverage)
|
|
31
January 2024 ($m)
|
|
31 January 2023 ($m)
|
|
Cash
|
|
$140
|
|
$198
|
|
Available credit
facility
|
|
$525
|
|
$800
|
|
Estimated distributions during the
next 12 months
|
|
$627
|
|
$633
|
|
Total sources
|
|
$1,292
|
|
$1,631
|
|
Estimated investments over the next
36 months
|
|
$1,467
|
|
$1,579
|
|
Medium-term Coverage Ratio
|
|
88%
|
|
104%
|
Commitment Coverage Ratio
|
(Short-term liquidity as a percentage of Total Investment
Pipeline)
|
|
31
January 2024 ($m)
|
|
31 January 2023 ($m)
|
|
Cash
|
|
$140
|
|
$198
|
|
Available credit
facility
|
|
$525
|
|
$800
|
|
Total sources
|
|
$665
|
|
$998
|
|
Investment Pipeline
|
|
$2,501
|
|
$2,804
|
|
Commitment Coverage Ratio
|
|
27%
|
|
36%
|
Disclosures
Investments
The companies represented within
this report are provided for illustrative purposes only, as example
portfolio holdings. There are over 14,000 individual companies in
the HVPE portfolio, with no one company comprising more than 2.1%
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 January 2024 NAV is based
on the 31 December 2023 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 January 2024. 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 page 104.
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.
> 14% of underlying partnership
holdings are denominated in euros. The euro-denominated Investment
Pipeline is €11.3 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.
> 0.3% of underlying partnership
holdings are denominated in Canadian dollars. The Canadian
dollar-denominated Investment Pipeline is C$5.9 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.