Paper copies of the presentation will be available at the meeting.
Minutes:
3.1 Hannah Tobin and Kathleen Bacon of private equity (PE) fund of funds investment firm, HarbourVest Partners LLC, gave a presentation to the Committee. Due to digital formatting constraints the document cannot be published, but a hard copy is filed with the minutes. The presentation was in four parts: Firstly Ms Bacon covered the HarbourVest company, the length of experience, range of investments and investors and the track record of HarbourVest against alternative investments. Secondly she gave an overview of PE investment, noting the “illiquid” nature of PE investment, the three stages of PE cash flow (Investment, Development and Liquidation), the issues around valuation, and merits and risks of PE. Thirdly the publically traded fund HVPE, and explained that although the net asset valuation (NAV) is very strong, the share price hasn’t recovered from the dip in 2008. She listed steps being taken to amend this, but noted that Lewisham’s investment was above purchase price owing to favourable exchange rate situations with $US.
3.2 Hannah Tobin then spoke about the overview of Fund commitments LBL have with HarbourVest: Key points noted include:
· From 2006 to end March 13 $57.8million has been committed with return at $10.4 million and 22% has been returned (distributed) to date over the last three years.
· There is an IRR since inception of 4.6% which is 8.3% in £ when you take into account the favourable $ exchange rates.
· 69% are Primary investments with 14% Direct and 17% Secondary
· 47% in US and 42% in Europe
· 76% Buyout and 23% Venture
· During the 2008/9 downturn they were able to hold on to assets rather than being forced to sell
· The 3 highest investments by industry sector are Consumer 19%, Technology 17%, and Industrial 13%.
3.3 Hannah Tobin then discussed the future of Lewisham’s PE investments which are now in a mature, cash generative phase, and they believe the proportion of Lewisham’s funds in PE will drop down below 1% from 2017, our target being 3%. Maintaining this target level would require new commitments over several PE cycles. There slides showing how HarbourVest suggest LBL could do this, including investing in Fund IX and HIPEP VII.
3.4 After the speakers from HarbourVest had left the meeting, Members had discussions with Independent Adviser Scott Donaldson, and LBL officers. Key points from this are:
· Hyman Robertson will process the new information from HarbourVest and test it against their own internal models.
· Members were not inclined to make a decision on further investment in HarbourVest or other PE companies at this meeting.
· Conrad Hall suggested that other PE companies should be considered. This was discussed and in response to questions from Members, Mr Donaldson agreed that in his view HarbourVest are a “prime” PE firm and there are only a handful of other companies at that level. He reminded Members that the fund has recently undergone a dramatic simplification of investment structure and splitting the PE investment would re-complicate the structure. Cllr Maslin queried whether any additional benefit from even a company who was twice as successful, might not be outweighed by the additional internal and external costs, given the low percentage.
3.5 The Chair asked Mr Donaldson and the Group Finance Manager to look into this issue and make recommendations for the committee re future investment. It was not felt that any further Fund Managers need present to the committee unless officers feel it is necessary.
3.6 RESOLVED
that the committee note the contents of the report.