Pantheon International (LSE: PIN) flies under the radar of most investors, but I believe that the fund is worth a closer look.
Over the past five years, the fund, which invests in private equity assets around the world, has produced a return for investors of 134% for investors excluding dividends, outperforming the FTSE 100 by 110%.
And unlike other shares, which are generally volatile, Pantheon has produced these returns with little volatility; the shares have marched steadily higher over the past 10 years despite the wider market turbulence.
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Underlying asset value growth
Today the private equity manager reported yet another healthy increase in the underlying asset value of its portfolio. Pantheon’s net asset value per share at the end of August hit 2,303p, an increase of 131p, or 6% from the NAV reported at the end of July.
The fund manager’s portfolio generated net cash of £22.5m during the month and completed six new investments amounting to £38m. This included a £13.7m secondary investment in a portfolio of five energy and transport assets, and an £11.4m secondary investment in an educational business with an established footprint in Europe, Latin America and Africa.
Other investments included a £3.1m allocation alongside BC Partners in PetSmart, a specialty pet retailer with over 1,500 stores in North America.
Time to buy?
Pantheon has been able to generate such steady returns for investors over the years because the firm invests in private assets, which are not correlated with the stock market. These are growing businesses with a huge runway for expansion ahead of them allowing Pantheon and its investors to reap enormous rewards.
Since inception, the firm has grown its net asset value at a rate of 11.9% per annum. However, at the time of writing the shares are trading at a discount of 28% to the NAV per share. As long as the company can continue to grow its asset value at a double-digit rate every year, I believe this is a very attractive investment opportunity for investors.
Cash cow
Electra Private Equity (LSE: ELTA) operates a similar business model to Pantheon and has produced similar returns for investors over the past decade. For the 10 years to March 31, Electra has grown its NAV by 230% and seen its shares rise by 237% with an annualised return on equity of 13% over the decade. Earlier this year the investment trust decided to return £1bn to investors via a special dividend after a decade of steady returns.
Over the long term, Electra’s management is targeting annualised NAV growth of between 10% and 15%, which is clearly a comfortable range based on the performance of the past 10 years.
I believe that the firm can continue to churn out these impressive returns as the business is currently managed by Edward Bramson, whose Sherborne Investors investment vehicle is the biggest shareholder in Electra. Sherborne fought a long and bitter campaign to get Bramson on Electra’s board as part of a plan to overhaul the private equity firm. Sherborne’s team believes there’s more value to be unlocked from Electra’s portfolio, implying that the trust will see further growth in its NAV during the years ahead.
