Private Equity Investor writes down NAV

The UK investment trust investing in US venture capital funds has announced a 21 per cent write-down of net asset value to £71m but says a recovery of market conditions is now underway.

Private Equity Investor, the investment trust that invests in emerging growth companies through IT-focused US venture capital funds, has reported a sizeable decline in its net asset value for the year ended 31 March 2003.


In its preliminary results, the firm reported a 21 per cent downturn in NAV, from £92m to just over £71m. In total, the trust’s NAV has fallen by 25 per cent in the three years since the company raised £100m via a stock market listing. Although significant, the decline compares favourably with the fall in the NASDAQ Composite Index of 68 per cent over the same period, the company said.


PEI’s share price has fallen from an average of 124 pence to 87.5 pence per share during the period, a drop of just under 30 per cent. PEI shares are trading at a 39 per cent discount to NAV.


At the year-end, the eighteen venture capital partnerships in which Private Equity Investor has invested between them held investments in 378 private companies and 24 public companies. In total, there were 111 new investments made during the year and 219 further funding rounds resulting in draw-downs from Private Equity Investor totalling $18.3m. These capital calls represent a 15.18 per cent slowdown in the rate of draw-downs when compared with the same period last year.


During the year, the investment trust’s portfolio yielded two IPOs, five market disposals and 33 write-ups compared with 14 last year. The rate of write-downs increased slightly from 149 to 155, as did the number of write-offs which grew from 52 to 55. Distributions from trade sales and market disposals totalled $1.34m.


“Although this latest reporting period […] did not see any upturn in sentiment in the public markets, there is a widely held view among our funds that the tide in venture capital is now turning,” said Barbara Thomas, executive chairman of PEI, in a statement. “Some fund managers actually believe that 2002 represented the best buying opportunity in this sector cycle.”

“We consider the company’s venture portfolio to be well diversified across a variety of sectors that are exhibiting promising growth,” added Thomas. “Companies developing and building wireless platform services, wireless gateways and networks, medical devices, and certain Internet services are doing particularly well.”