PIP sells £154m in unfunded commitments

The listed fund of funds managed by Pantheon Ventures is currently finalising further secondary sales.

Pantheon International Participations (PIP), the London-listed fund of funds managed by Pantheon Ventures, has sold off a number of limited partner interests to reduce its burden of unfunded commitments.

The sale relieves PIP of £154 million (€176 million; $245 million) in unfunded commitments, but will incur a loss of around £68 million on the holding value of the interests, the firm said in a statement.

The sale will reduce the net asset value per share by around £1.02 – or just under 10 percent, the firm said.

The listed vehicle is also in talks to make further disposals in the secondaries market with additional details set to emerge later this week.

Once these disposals have been finalised, PIP’s liquidity position “should be sufficient to enable it to finance all remaining commitments”, Andrew Lebus, managing partner at PIP, said in a statement.

As of the end of March, PIP had around £145 million in available financing, including cash, a bank loan facility and standby commitments to subscribe for redeemable shares.

PIP, like many listed private equity investors, is trading at a deep discount – around 62 percent in PIP’s case – to its net asset value.

One significant driver of the widespread discounting has been the over-commitment strategies pursued by many listed fund of funds, including PIP, whereby managers make a greater volume of commitments than the value of their asset base. As distributions are returned from earlier private equity investments, they are recycled to honour ongoing commitments.

When distributions slow – as they have done – this strategy runs into problems, as there is an imbalance between cash coming in and going out. In the first quarter of 2009, PIP reported cash distributions of just £8.8 million, compared with £21.8 million invested.

PIP is listed on the London Stock Exchange. Its share price, having opened this morning at £3.80, was down slightly at around £3.70 at press time.