A top-ten shareholder in HarbourVest Global Private Equity (LSE:HVPE) has issued an open letter urging significant reforms at the London-listed private equity fund ahead of a key continuation vote in July 2026.
Asset Value Investors (AVI), which has a 3.3% stake, welcomed recent moves such as the introduction of a continuation vote, enhanced buyback mechanisms, and a pivot to a co-investment model.
But it argued that these measures are insufficient.
"Given the starting point from where and when these initiatives were introduced, the scale of the task ahead remains sizable and, if proposals such as those outlined in this letter are not progressed, AVI currently intends to vote against continuation," the letter penned by AVI fund manager Tom Treanor said.
He criticised HVPE's persistently wide 28% discount to NAV and underwhelming NAV performance over multiple timeframes, claiming these issues erode shareholder value and undermine the company’s investment case.
In short, AVI is urging the board to consider two primary strategic options: either enshrine a capital return policy prioritising buybacks or redemptions at NAV over new investments, or run a formal sale process for the company or its portfolio.
It proposed that all new commitments be suspended unless HVPE’s discount narrows to 15% or less for a sustained period.
The letter also criticised the accuracy of HVPE’s cash flow forecasting and questioned the prudence of capital allocation given an 18% gearing level.
If such material changes are not pursued, AVI is calling for a comparative analysis of expected shareholder returns under the status quo, a managed wind-down, or a sale.
Analyst views
Analysts at Barclays said the letter from AVI puts the onus on the board ahead of the continuation vote, which is due in July.
Panmure Liberum analysts, meanwhile, said it was "the latest call from investors for boards to be more proactive in managing discounts in the sector above and beyond share buyback programmes".
They agreed with AVI's point that "the status quo is unlikely to be sufficient" to sustainably narrow the 27% current and persistent discount, and that while HVPE isn’t alone in the listed PE peer group "its discount is wider" the average and means "it is very hard to justify new investments over buying back shares".
"HVPE is also in a fortunate position, owing to its size, that it could allocate significantly more capital to buybacks or tender offers, without making the fund too small to be investible."
While the Pan Libs analysts stress that access to sectors like private equity in a listed vehicle "has to have a place in investors’ portfolios," they acknowledge that the share price and discount volatility in recent years has made it increasingly difficult.
"Boards have to be more proactive in seeking to protect discounts, before they get to a point where they become almost unmanageable.
"As AVI point out in their letter to HVPE, there is an active secondary market for PE funds, and such transactions rarely happen at discounts wider than 10-15%.
"With that in mind, Boards should see this as a maximum discount level and be using all the capital allocation tools in their arsenal to protect that."
Barclays reiterated its 'overweight' stance, believing the 26% discount "remains attractive with near-term catalysts including positive near-term NAV growth (partly driven by positive public market performance) and potential realisation activity".
"The company introduced a number of structural improvements in Q1 2025 and the continuation vote provides upside potential with the possibility of further shareholder-friendly initiatives."
** UPDATE: Adds analyst comment **