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HVPE Annual Report and Accounts 2018 Accounts and Report Annual HVPE Annual Report and Accounts 31 January 2018
Building Long-term Wealth by Investing in Private Companies Investment Objective The Company’s investment objective is to generate superior shareholder returns through long-term capital appreciation by investing primarily in a diversified portfolio of private markets investments.
Why Private Markets? Globally, the opportunity set in private companies greatly exceeds that available in the listed markets. Historically, private equity has delivered strong returns, outperforming listed equity over the long term.1
Why HVPE? HarbourVest Global Private Equity (“HVPE”) provides investors with diversified access to opportunities in private markets through investing into funds managed by HarbourVest Partners, a leading independent global private markets asset manager. HVPE has a strong track record and in the ten years ending 31 January 2018 had more than doubled its net asset value (“NAV”) per share, implying a compound annual growth rate of 7.5% in US dollar terms (equivalent to 11.2% in sterling).2
Why Now? A growing number of mainstream investment managers are now focusing on the opportunities available in private companies. Meanwhile, established specialist funds such as HVPE have been delivering strong returns for many years, whilst the shares continue to trade at a discount to the value of their assets.
1 Globally, private equity funds returned 12.2% annually over the 20 years to 30 September 2017, compared to 6.9% for the MSCI World on a public market equivalent (“PME”) total return basis. Source: Burgiss. Past performance is not necessarily indicative of future returns. 2 Represents the compound annual growth rate of the NAV per share over the last ten years from $10.39 (£5.23) at 31 January 2008 to $21.46 (£15.12) at 31 January 2018. Highlights Strategic Report
Year to 31 January 2018
Contents per S are per S are co erte Highlights 1 2017: +10.3% 2017: +24.8% Strategic Report What is HVPE? 2 +16.2% The HVPE Difference 3 +3.0% Why Invest in HVPE 4 Governance Report Chairman’s Statement 5 Investment Manager’s Review 10 Celebrating Ten Years 14 Share Price Trading and Liquidity 16 Managing the Portfolio: Strategic Asset Allocation and Diversification 17 Managing the Company 20 Summary of Net Assets 25 Recent Events 26 S are rice co erte S are rice Principal Risks and Uncertainties 27 Investment Manager 2017: +21.1% 2017: +37.2% About HarbourVest 30 The HarbourVest Platform 32 +18.2% +4.8% HarbourVest Investment Committee 33 A Focus on Real Assets 34 Global Private Markets: Overview and Outlook 36
Investment Portfolio StatementsFinancial Commitment Phase 38 Investment Phase 40 Growth Phase 42 Mature Phase 44 Manager Spotlight 46 e t e t ort o io ro t i tri tio rocee Companies Spotlight 50 Secondaries Case Studies 54 Governance Report $248.8m $405.1m Board of Directors 58 Directors’ Report 60 Board Structure and Committees 66 Corporate Governance 73 Statement of Directors’ Responsibilities 77 Directors’ Remuneration Report 78 Financial Statements Independent Auditor’s Report to the Members of HarbourVest Global Private Equity Limited 79 Data Supplementary Independent Auditor’s Report to the Directors of HarbourVest Global Private 3 As the Company has a US dollar denominated NAV and a sterling denominated share price Equity Limited 85 (since 9 September 2015) we have shown the performance of the NAV and share price in both Audited Consolidated Financial Statements 86 currencies for comparative purposes. All figures have been converted at the prevailing currency conversion rate as at 31 January of each year displayed. Notes to the Consolidated Financial Statements 94 Supplementary Data HVPE’s HarbourVest Fund Investments 102 Largest Companies and Managers 104 Glossary of Private Equity Terms 120 Disclosures 123
HVPE Annual Report and Accounts 2018 1 What is HVPE?
What is HVPE? Owning shares in HVPE HVPE (or the “Company”) is a London listed, FTSE 250 private equity investment company with assets of provides investors with a $1.7 billion and a market capitalisation of £1.0 billion as at 31 January 2018 (ticker: HVPE). comprehensive and well- The Company provides access to private companies and managed, ready-made global portfolios of private companies through funds managed by HarbourVest (the “Investment Manager”)1, an innovative private equity programme. global private markets asset manager with more than $49 billion of assets under management2 and a long history of success. Track Record By committing capital across HarbourVest’s primary, By following a consistent and proven investment strategy, secondary, and direct co-investment programmes HVPE has delivered steady and robust NAV growth (see page 32, “The HarbourVest Platform”), HVPE has and has outperformed the public markets since inception, created a private markets portfolio that is diversified by as measured by the FTSE All-World Total Return (“TR”) geography, strategy, stage of investment, vintage year Index. This has been achieved whilst running a well- and sector. As at 31 January 2018, HVPE’s portfolio was diversified strategy with relatively low volatility and made up of 42 HarbourVest funds and two secondary maintaining a prudent balance sheet with ample co-investments. The Company’s structure is shown liquidity to fund new investments. on page 20.
HVPE is structured to provide investors with broad exposure to a carefully selected range of exciting opportunities in private companies around the world, from technology start-ups to mature, established businesses looking for the next phase of growth.
Building Long-term Wealth: Steady NAV Growth Since 2009