Conversus to cease operations

The firm has agreed to sell its private equity portfolio to HarbourVest for $1.4bn, and will wind down operations after the deal closes – ending several years of struggling to handle market volatility.

After initiating a strategic review in February, listed private equity fund of funds Conversus Capital is selling its private equity holdings for $1.4 billion to HarbourVest Partners, and will cease to exist after it completes a liquidation of its assets.

HarbourVest, which last year acquired listed fund of funds Absolute Private Equity, will buy the portfolio through its funds and also its listed unit HarbourVest Global Private Equity. Under the deal, 100 percent of Conversus’ unitholders can receive cash for their holdings, while up to 49.9 percent of eligible unitholders can remain invested in the Conversus portfolio by receiving units in HarbourVest Structured Solutions.

Conversus' chief executive officer, Bob Long, along with other members of Conversus Asset Management's investment committee, will resign.

Conversus’ decision to wind down operations comes after several years of struggling in the market volatility, which caused it, like many listed private equity firms, to trade at wide discounts to its underlying net asset values. According to European trade body LPEQ, private equity investment trusts have suffered a 31.3 percent decline in their average share price over the last five years – after precipitous falls post-Lehman, they’ve never really recovered.

Conversus believes that the HarbourVest proposal represents the best outcome for unitholders.

Conversus spokesperson

However, things appeared to be looking up for Conversus as early last year the firm announced it would begin to make new commitments after an almost two years of simply managing its private equity portfolio, or what the firm called a “realisation strategy”.  By September, the firm again announced it would cease making new commitments and focus instead on realising its portfolio. The firm also said it was working to reduce its management fee in light of the strategy change.

Ultimately, the firm couldn't overcome “the persistent trading discount of its units to NAV that wasn't in the best interests of unitholders”, according to a spokesperson for the firm. “Today's announcement represents the culmination of [the] review of strategic options by the board, management and its financial advisor, JP Morgan Securities.

“Conversus believes that the HarbourVest proposal represents the best outcome for unitholders,” the spokesperson said.

The Guernsey-listed firm reported in May its estimated net asset value at $26.36 per unit, which would have been a decrease of 1.1 percent from the 30 April NAV per unit of $26.65. The firm debuted on the Euronext in 2007 at $25 per share, but was trading as low as $18.25 in the depths of the downturn.