Private equity’s big clear-out boosts SVG
A buoyant market for buyout firms selling off pre-crisis investments boosted returns for the listed British private equity investor SVG Capital last year, as disposals of companies including Hugo Boss and Freescale raised cash and lifted valuations.
SVG’s portfolio of private equity funds generated a total return of 10 per cent and a 14 per cent increase in its net asset value per share for the 13 months to the end of January, according to its annual results on Monday.
The group handed a record £330m in cash to shareholders, who invest in SVG as a tradeable proxy for the performance of buyout funds, including Permira, its largest holding.
The results were tempered by the euro’s slide versus sterling — total return was 17 per cent in local currencies — but they also show how a year of surging valuations on stock markets has resurrected investments that private equity once preferred to forget.
The increase in SVG’s NAV to 588p a share was driven by the doubling last year of the share price of Freescale, the US semiconductor company which has since been acquired by NXP for $16.7bn.
Permira invested in Freescale in 2006 as part of a private equity consortium. Waylaid by the financial crisis, the company’s value languished below its purchase price until last year.
“We’ve been waiting for a long time for that one,” said Lynn Fordham, SVG chief executive. “Freescale going above cost was a big thing.”
Sales by Permira of shares in Hugo Boss also drove nearly half of the £330m returned to shareholders, and the completion of its exit from the 2006 investment this month will provide further cash this year.
Spun out from Schroders’ private equity business nearly two decades ago, SVG has sought to overhaul its investment strategy in the past three years, including reducing its reliance on Permira.
The group’s 10 largest fund investments fell from four-fifths to two-thirds of its portfolio over the year. A quarter of the portfolio is in 30 investments — including European and US funds Cinven and Clayton Dubilier & Rice — added since 2012 in a £467m commitment of capital.
The group said it also changed its year end from December 31 to January 31 because it needed more time to collect and calculate the end of year valuation of its various investments.
SVG has returned £540m to shareholders since 2012, more than its market capitalisation before it announced its new strategy.
The flipside is that rising valuations are making it harder for buyout firms to find good deals. “We’re very careful whom we choose as managers: we’re quite cautious” at the moment, Ms Fordham said.
