HarbourVest Global Private Equity (HVPE ) has doubled the amount of money it is setting aside for buybacks and special dividends, simplified its structure and scheduled a continuation vote to focus minds as it fights a near-40% discount. 

Shares in the £2bn listed private equity (PE) fund closed 4.8% higher, at £27.10, yesterday as the market and analysts alike responded positively to the measures announced earlier in the day, before a further gain this morning. 

The investment company, run by Boston-based private markets firm HarbourVest, increased the amount of cash profits it will hive off into its ‘distribution pool’ from 15% to 30%.

The mechanism was brought in last year to keep money aside to drive shareholder returns via buybacks given HVPE has been plagued by a long-standing discount, which has tended to be even wider than other sector rivals. 

The enhanced distribution pool will hopefully be supported by the rebound in realisations that began in the second half of last year. HVPE forecasts portfolio distributions of $609m in 2025 based on the ‘conservative assumption that just under 16% of current net asset value (NAV) will be realised’.

‘The board believes the distribution facilitated through the pool will make a material difference to shareholders’ returns, ensuring they benefit more directly from the strong value growth delivered by HVPE’s high-quality portfolio,’ said the fund in a stock market statement.

Last week, HVPE, which is under pressure from activist shareholders, said it had been in ‘constructive talks’ with investors over how to increase the value of its shares. Although the portfolio is currently valued at nearly £3.4bn, the market values the fund at just £2bn despite it buying back $90m (£72m) worth of shares in the past year.

After yesterday’s bounce, the discount narrowed from about 40% to 36%, according to Deutsche Numis data. 

As part of a range of initiatives to narrow that, HVPE has also introduced a continuation vote in July 2026, giving investors a chance to decide its future once the new measures have had time to take effect. 

The board said it was the first investment company in the private equity funds-of-funds sector to offer a continuation vote. Shareholders will be asked in a simple majority poll if they wish the company to continue or wind up. The continuation vote is believed to be a proactive step rather than something shareholders called for. 

However, since November, HVPE has already come under pressure from activist Metage Capital to offer quarterly exits or wind up. 

Fellow activist Asset Value Investors – which has previously tackled other listed PE trusts such as Oakley Capital Investments (OCI ) – also disclosed a higher 3.2% stake in HVPE in December, making it the third-biggest shareholder, according to Refinitiv data.

Simpler structure

Before the continuation vote, HVPE will also start to move towards a simpler investment structure that will see de-facto managers Richard Hickman, Greg Stento, and John Toomey deploy capital via a ‘separately managed account’ rather than into multiple Harbour fund of funds. 

This single account will then invest directly in external private equity funds, secondary opportunities and co-investments in individual companies, removing the layer of fund of funds. 

The board said the new strategy will ‘simplify HVPE’s investment structure over time’, add flexibility and improve liquidity in the portfolio, as well as reduce ‘embedded leverage’ – a reference to the sometimes significant debt used by the underlying funds. 

HVPE chair Ed Warner said although the fund’s NAV growth had outperformed most peers over the past 12 months – rising 6.4% – the discount remained wide, and the initiatives should help to address that as well as maximise returns.

‘The board is excited by HarbourVest’s confidence in the outlook for private markets, and believes that the distribution pool, accompanied by the green shoots of recovery in the private equity market, positions HVPE and its shareholders to benefit from improved valuations and realisation opportunities,’ he said.

Warner also thanked investors for their support during a ‘challenging period’, adding that a recovery in M&A and IPO markets act as a positive catalyst for the sector.

Brokers say bravo

Analysts responded positively to the announcement, with JPMorgan Cazenove’s Christopher Brown upgrading HVPE to ‘overweight’ from ‘neutral’. 

Brown said taking into account the boosted distribution pool, HVPE could be set to buy back nearly seven million shares for around £189m.

‘Shareholders will have 18 months to view the performance of the new distribution pool policy and then get an opportunity to vote on the continuation of HVPE. A policy structure such as what HVPE has announced is a good balance between the desire to maintain an invested portfolio and [meeting] the desire of investors for more capital returns,’ said the analyst. 

Brown believes this is a ‘superior’ plan to offering 5% of NAV redemptions each quarter – seemingly referring to Metage’s proposals – as it will not affect investment decisions and is tied to realisations.

‘We expect these [measures] to be well-received by investors, and we welcome them,’ said Numis analyst Ewan Lovett-Turner.