SVG soars as Permira’s funds improve

The listed fund of funds reported strong earnings in the first half but is not yet ready to start committing to new funds.

SVG Capital, the listed fund of funds that commits mostly to UK buyout house Permira, will continue to focus on “strengthening the balance sheet” rather than making new commitments after a strong first half of the year.

SVG’s £1.2 billion (€1.4 billion; $1.9 billion) private equity investment portfolio reported a total return of 21.6 percent for the six months ending 30 June, largely driven by upswings in Permira’s funds, the fund of funds said in an earnings statement. The portfolio was boosted by strong performances of casino operator Galaxy Entertainment and fashion brand Hugo Boss.

The fund of funds reported an overall increase in its net assets per share of 24.7 percent.

Performance will be helped by Permira’s announcement Monday that it is exiting animal nutrition company Provimi to Cargill for $2.1 billion. The value of the realisation for SVG is £116.9 million with proceeds expected later this year, the fund of funds said in a statement. Permira acquired the company in 2007 for about €580 million as part of a larger investment. The firm sold off a piece of the company, Provimi Pet Food, earlier this year for €188 million to Advent International. For Permira, the sale generated a 2.3x return multiple, according to a person with knowledge of the deal.

Despite the strong earnings news, SVG will remain committed to its strategy of tending to its balance sheet and not committing to new funds for now.

“We have continued to protect and improve the strength of the company’s balance sheet and in the short to medium term will remain focused on this, especially in the context of the potential impact the current economic uncertainty and volatility in the financial markets may have,” SVG’s chief executive officer Lynn Fordham said in a statement.

The portfolio’s five largest investments – Hugo Boss and VFG, Galaxy, Arysta LifeScience, Provimi and igloo Group – reported the largest valuation gains over the first half, SVG said in the statement. The five holdings represent 63 percent of the fund of fund’s private equity portfolio value.

The earnings numbers were “very good”, said JPMorgan Cazenove analyst Christopher Brown, “some 5 percent ahead of our estimates and driven primarily by the fundamentals of strong earnings growth, though there was a tailwind from earnings multiples and currency”.