Pantheon International [LON:PIN], a FTSE 250 investment trust’s, share price has fallen by over 30% since the beginning of the year, but is the steady decline set to come to an end in the coming months?
Much like the UK economy, the private equity investment trust industry is in a state of extreme turmoil. However, Pantheon’s shares seem undervalued, which means the company’s stock may represent an extremely profitable investment opportunity for retail investors looking to invest in a private equity investment trust in the near future.
Who is Pantheon International?
Pantheon International is a FTSE 250 investment trust that invests in a diversified portfolio of private equity assets managed by third party managers across the world. An investment in the company’s fund gives shareholders access to the growing private equity market, effectively making investment opportunities in private companies available to the public.
Pantheon International is one of the longest established private equity funds listed on the London Stock Exchange. The company has an annualised NAV growth of 12.4% since inception in 1987, far outperforming the FTSE All-Share and MSCI World over the same period. It has assets under management worth USD 84.6bn (as at 31 December 2021), and a team of 121 investment professionals globally.
Investment Process
Pantheon International actively manages its portfolio through the selection and purchase of private equity assets in a diversified and balanced portfolio. Exposure is balanced across different investment strategies and maturities by investing in selected funds operating in different regions of the world. The company’s investment process comprises of initial screening followed by preliminary and detailed diligence, before the eventual commitment process takes place. Detailed risk assessments are performed before a company is added to its existing portfolio.
The diversification of Pantheon International’s portfolio helps to reduce volatility both of returns and cash flows. In terms of geographical diversification, the portfolio is weighted towards the more developed private equity markets in the USA and Europe, while Asia and emerging markets provide access to faster-growing economies. Its sectoral exposure to a wide range of industries including IT, healthcare, consumer goods and industrials diversifies the effects of cyclical trends within particular market segments.
Why Invest in Private Equity?
Private equity refers to privately negotiated investments that are typically made in non-public companies. Private equity investments can be made in a range of stages of a business’s life, financing everything from start-ups to well-established firms.
Although the private equity space is currently not in the best condition, it has historically been an attractive asset class for a broad range of investors as it can boost the performance of investment portfolios and provide access to fast-growing companies in sectors that are harder to reach through public markets. The expected size of the global private equity and venture market is expected to reach USD 11.1trn by 2026, with 88% of institutional investors intending to maintain or increase their allocation to private equity according to 2022 Preqin Global Private Equity Report.
However, the spread of performance in private equity is much wider than in other asset classes. The increased volatility attached to the private equity industry represents a heightened level of risk which must be considered before investing. When the economy is in decline or is undergoing a recessionary phase, private equity investment trusts, such as Pantheon International, tend to underperform relative to the market.
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