Bell Potter LIC Weekly: Well Done and Done Well

By Hayden Nicholson | More Articles by Hayden Nicholson

US$72bn alternative asset manager GCM Grosvenor manages the underlying investments for the Pengana Private Equity Trust (PE1), focusing predominantly on Funds operating in Small and Middle Markets, where GCM Grosvenor’s Buyout Co-Investments have historically been executed at lower purchase price and leverage multiples. Long-term portfolio goals have been achieved 12 months in advance of the expected 4 year term schedule for ramping-up the private equity portfolio, as detailed in the IPO Prospectus. Deliberate and judicious rotations through the underlying holdings and liquidity sleeves, in an attempt to eliminate the likelihood of a j-curve risk event while ensuring adequate returns, during the course of this ramp-up period, has been achieved and to a commendable extent. The Trust is now fully committed with over 350 portfolio companies on a look through basis, with the live 1:5 Entitlement Offer to eligible unitholders seeking to increase the incremental capital, given the backdrop of anticipated unique opportunities for private equity investments over the following 6-12 months. Fewer liquidity events and market dislocations in response to the U.S. inflationary shock may provide for the capacity to offer solutions to high quality growth-oriented companies that require continued financing.

The viability of incremental capital has been assessed through the lens of the overall portfolio construction, with GCM Grosvenor targeting to increase the diversification and risk mitigation of the vehicle. The Manager is also targeting full investment of incremental capital within 6 months, thereby minimising the effects of a cash drag. The Trust has returned 12.3% p.a. since inception, notwithstanding the fact that there were periods of heavy cash exposure with an additional A$93.5m raised in July 2020. Approximately half of the Offer proceeds are intended to be invested across 4-6 private equity deals (Co-Investments and Secondaries, subject to the prevailing opportunity set).

GCM Grosvenor’s expertise, experience and relationships places them in a superior position to identify and facilitate an underlying investment in top quartile Investment Managers, which can often be difficult to access for investors due to excess demand for such Funds. Secondaries, for example, are valued based on a reference period, which may soon be at a trough for growth-oriented businesses, in turn providing attractive opportunities from a re-basing effect. Dealflow and participation in Primary and Co-Investments can also allow the Manager to individually assess each transaction on merit, enhancing visibility, reducing information asymmetry and extending arbitrage opportunities when determining an appropriate adjusted NAV and corresponding premium/discount across vintages. This diverse approach also strategically considers downside risk mitigation.

Under the Entitlement Offer, the issue price per new unit is set to be $1.54, being the NAV per unit of the Trust as at the end of February, representing a 2.9% discount to the closing unit price of $1.58 and a 3.9% discount at par to the 6 month average premium. Applications close 31 March at 17:00 Sydney time, with the allotment date of the new units issued under the Offer being 7 April.


Bell Potter’s Indicative NTA tracks the ‘indicative’ movement of a LIC’s underlying NTA each month by monitoring the percentage movements of the disclosed holdings and using an index to track the movement of the remaining positions. The Indicative NTA works best with LICs that have a high percentage of investments concentrated in its Top 20, regular disclosure of its Top 20, lower turnover of investments, regular disclosure of its cash position and the absence of a performance fee. We have also included an adjusted indicative NTA and adjusted discount that removes the LIC distribution from the ex-dividend date until the receipt of the new NTA post the payment date. This report is published each Monday prior to the market open and is available on a daily basis. Intraday indicative NTAs will be available on request through your adviser.

For full details refer to the detailed report below or click here to download your copy.

About Hayden Nicholson

Hayden Nicholson is an ETF/LIC Specialist at Bell Potter Securities. Hayden provides comprehensive coverage of the ETF and LIC sectors, producing a range of highly regarded reports covering investment fundamentals, asset class structure and cost, and the role of managed investments in portfolios.

View more articles by Hayden Nicholson →