Should you invest in HarbourVest?

HarbourVest is a private equity fund-of-funds providing cheap access to fast-growing unlisted companies. Should you invest?

HarbourVest private equity
(Image credit: Getty Images)

The popularity of any investment trust, and hence the discount or premium to net asset value (NAV) at which its shares trade, ought in theory to reflect its historic performance and its prospects for the future. Investors, however, are far from rational. A trust that has grown its NAV by 251% in 10 years, doubling it in five, compared with the FTSE All-World index’s total return of 138%, ought to be a market darling. But the shares of HarbourVest Global Private Equity (LSE: HVPE) trade at a discount of over 40%. 

Doesn’t that suggest that its portfolio is massively overvalued? That argument might be plausible if stock markets had crashed, the world was facing recession, valuations were defying gravity and disposals had ground to a halt. But markets have been rising steadily against a benign economic backdrop. The average valuation multiple for a representative sample of the portfolio at year-end was a reasonable 14 times cash flow, average cash flow having increased 15% in the year.

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Max King
Investment Writer

Max has an Economics degree from the University of Cambridge and is a chartered accountant. He worked at Investec Asset Management for 12 years, managing multi-asset funds investing in internally and externally managed funds, including investment trusts. This included a fund of investment trusts which grew to £120m+. Max has managed ten investment trusts (winning many awards) and sat on the boards of three trusts – two directorships are still active.

After 39 years in financial services, including 30 as a professional fund manager, Max took semi-retirement in 2017. Max has been a MoneyWeek columnist since 2016 writing about investment funds and more generally on markets online, plus occasional opinion pieces. He also writes for the Investment Trust Handbook each year and has contributed to The Daily Telegraph and other publications. See here for details of current investments held by Max.