This page contains analysis of the investment portfolio at 31 March 2014.
The management buyout funds portfolio represents the majority of SVG Capital’s investment portfolio. Currently, the majority of these funds are advised by Permira, a leading international private equity specialist (largely Permira IV). More recently, we have started to build on this portfolio with commitments to a limited number of other leading private equity managers focused on management buyouts in Europe and the US.
At 31 March 2014, the management buyout funds portfolio represented 80% of the investment portfolio and is invested in seven funds with an underlying portfolio of 41 companies.
|Mar 2014||Dec 2013|
|Percentage of investment portfolio||79.5%||80.7%|
Key features of Q1 2014:
- 0.5% total return over the quarter
- 6.9% fall in Hugo Boss’ share price broadly offset by 52.2% gain in Freescale’s share price
- Unquoted portfolio values remained largely unchanged
- Significant distributions as the Permira investments continue to be realised
- Largely driven by the full realisation of ProSiebenSat
- Increased pace of calls to finance new investments
- Five new portfolio companies completed during the quarter
Major unrealised portfolio movements
1 Gross of any carried interest
2 Including Permira feeder vehicles
Two largest movements over Q1 2014:
- Hugo Boss’ share price decreased by 6.9% over the quarter amid sector wide growth concerns. Hugo Boss has continued its growth trajectory and closed FY 2013 with sales up 6% (in constant currencies) and EBITDA up 7% on the back of new store openings and solid LFL growth, with all regions contributing. For 2014, management is targeting high single-digit growth in currency adjusted sales and earnings.
- Freescale’s share price increased by 52.2% over the quarter following a successful primary offering which repaid US$700m of debt reducing net debt/EBITA and improving FCF conversion. The business has performed strongly over the last several quarters. Over Q1 2014, gross margin improved by +90bps to 44.8% and YOY revenue grew by 15%.
Since its listing in 1996, the majority of SVG Capital’s commitments have been made to Permira, one of the largest and most experienced European private equity firms (largely Permira IV). More recently, SVG Capital has begun to diversify its portfolio through commitments to other private equity groups with the aim of building a portfolio of a limited number of leading private equity managers focused on management buyouts.
SVG Capital made commitments to three leading private equity managers during 2013; Cinven, Permira and Clayton, Dubilier & Rice.
- Cinven’s strategy is to invest in upper mid-market to large buyouts, typically with an enterprise value of €300m–€1.2bn based in Europe.
- Team of 54 investment staff operating from five offices, Cinven’s investment approach is sector driven with a focus on six sectors – business services, consumer, financial services, healthcare, industrials and TMT.
- Cinven’s approach to growing its portfolio is based on a clearly defined model that has two main pillars – via growth in new markets and by acquisition and applying global best practice within core existing markets.
- At 31 March 2014, the fund was 29.7% called and had committed to invest in seven companies: AMCo; Prezioso; Pronet; Host Europe; CeramTec; Heidelberger Leben and Medspace.
- Permira V will invest primarily in mid to large cap buyouts with exposure to faster-growing global markets and sectors, typically with an enterprise value of up to €3bn.
- Team of over 120 professionals operating from 12 offices based around the globe, Permira concentrate on five sectors: consumer, TMT, industrials, financial services and healthcare.
- Within these sectors Permira V will focus on acquiring businesses with market leadership positions, resilient thematic growth and potential to globalise.
- At least 70% of Permira V will be invested in businesses which have or intend to have significant activities in Europe.
- At 31 March 2014, the fund was 7.0% called and had committed to invest in five companies: Dr Martens; Bestinvest; Atrium; LegalZoom and CABB.
Clayton Dubilier & Rice
- Clayton Dubilier & Rice’s (CD&R) strategy is to make control investments in upper mid-market companies in the US and Europe (Germany, France and the UK), typically with an enterprise value of up to US$3bn.
- Team of 48 investment professionals, based in New York and London, concentrating primarily on four sectors; industrials, business services, healthcare and consumer/retail.
- CD&R’s investment model is focused on operational improvement within their portfolio companies utilising the combined skills of operating partners, who are former CEOs or other senior corporate leaders, and private equity investment executives. This partnership between private equity and operating skills runs right through the deal process from origination through to due diligence and post investment value creation stages.
- At 31 March 2014, the fund was 21.3% called and had committed to invest in three companies: Brand; PharMEDium and Ashland Water.
|Fund||Year formed||Current value
|Permira Europe I||1997||1.3||-|
|Permira Europe II||2000||16.9||-|
|Economic interest in iglo Group||n/a||19.5||n/a|
|SVG Sapphire IV||2006||9.5||-|
|Fifth Cinven Fund||2012||23.7||58.1|
|Clayton Dubilier & Rice Fund IX||2013||12.0||72.1|
|Management buy-out funds||823.3||281.4|
The Aberdeen SVG managed or advised funds’ portfolio represents the majority of the remaining investment portfolio and largely consists of investments in the SVG Diamond funds. The three SVG Diamond funds are leveraged private equity fund of funds products with diversified underlying portfolios of predominantly US and European focused buyout funds. SVG Capital has uncalled commitments of £16.6m to these funds.
At 31 March 2014, this portfolio represented 17% of the net investment portfolio.
|Mar 2014||Dec 2013|
|Percentage of investment portfolio||16.7%||15.5%|
Investing in four diversified private equity funds of funds managed or advised by Aberdeen SVG Private Equity Advisers.
Key features of Q1 2014:
- 4.5% total return as continued valuation increases in the underlying portfolios of private equity funds have been amplified by the leverage within the SVG Diamond fund structures
- The underlying portfolios consist of high quality private equity investments many of which are reporting strong revenue and earnings growth
- Portfolio distributions have continued at a good pace as the portfolios mature and managers take advantage of favourable exit market conditions – SVG Diamond funds are deleveraging ahead of previous expectations
SVG's look through exposure to the top five private equity funds, in aggregate
|Geographic focus||Vintage||SVG Capital look-through value at 31 Mar 2014|
|The Fourth Cinven Fund||Cinven||European||2006||£14.0m|
|CVC European Private Equity Partners V||CVC||Global||2008||£12.4m|
|Olympus Growth Fund V||Olympus||US||2007||£11.8m|
|Carlyle Partners V||Carlyle||US||2007||£11.2m|
1The value of the Company's exposure to Permira IV companies has been aggregated with the exposure through the MBO portfolio calculating the value of the 10 largest underlying companies.
Underlying companies - vintage year analysis at 31 March 2014