For the year ended 31 December 2020
NB Private Equity Partners Limited
2020 Annual Financial Report and Consolidated Financial Statements
Generating Long-term Growth
NB Private Equity Partners Limited
NB PRIVATE EQUITY PARTNERS LIMITED
Introduction | |
Chairman's Statement | 2 |
Our Investment Opportunity | 3 |
Investment Manager | 4 |
Investment Strategy | 5 |
Manager's Statement | 6 |
Environmental, Social and Governance | 8 |
Responsible Investment | 9 |
Strategic Report | |
2020 Results | 10 |
New Direct Investments & Realisations | 12 |
Key Performance Indicators | 13 |
The Portfolio | 16 |
Portfolio Case Studies | 21 |
Valuation | 24 |
Capital Position | 25 |
Summary Balance Sheet | 26 |
Market Review | 27 |
Credit Facility | 29 |
Ongoing Charges & Fee Analysis | 30 |
Risk Management and Principal Risks | 31 |
Governance | |
Board of Directors | 33 |
Directors' Report | 35 |
Viability Statement | 44 |
Statement of Directors' Responsibilities | 45 |
Corporate Governance | 47 |
Nomination and Remuneration Committee Report | 48 |
Letter from the Audit Committee Chairman | 49 |
Audit Committee Report | 50 |
Independent Auditor's Report to the Members of NB Private Equity Partners Limited | 53 |
Consolidated Financial Statements | 59 |
Appendices | |
Schedule of Direct Investments | 83 |
Endnotes | 85 |
Neuberger Berman | 87 |
AIFMD Disclosure Addendum | 88 |
Valuation Methodology | 91 |
Forward Looking Statements | 92 |
Alternative Performance Calculations | 93 |
Directors, Advisors and Contact Information | 95 |
31 December 2020 | Annual Financial Report
Highlights
2020 Summary
NAV Growth
21.4%
NAV per Share Total Return (USD)
Portfolio Realisations
$199m
Received During 2020
Strong Exits
2.9x
Gross multiple of capital on five final/full exits during 2020
Dividends Paid
$0.58
per Share (USD) / 3.6% yield
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NB Private Equity Partners Limited
INTRODUCTION | CHAIRMAN'S STATEMENT
Chairman's Statement
The COVID pandemic has presented unprecedented challenges for economies, societies, and healthcare systems across the globe, and sadly for many, also personal loss. Against this backdrop and the uncertainty that impacted many businesses throughout 2020, NB Private Equity Partners ("NBPE" or the "Company") performed extremely well, reporting a 21.4% total return in NAV for the 12 months.
The Company's strong performance reflects the benefits of the private equity model and its ability to respond quickly to rapidly changing market conditions, and the resilience of the portfolio which delivered robust underlying revenue and EBITDA growth and realisations at significant uplifts to carrying value and cost.
While the pandemic and the resulting economic challenges were impossible to predict, the Manager's late cycle positioning of the portfolio in high-quality assets, backed by a number of long-term investment themes served the Company well. Even when the economic turmoil was at its height in the first half of the year, the portfolio demonstrated resilient performance. It went on to deliver very strong performance in the latter half of the year, as the economic rebound started to take shape.
The long-term growth of the Company is impressive with cumulative total return NAV growth of 41.3% and 83.6% over three and five years, respectively.
Share Price and Discount
The share price generated a total return of 0.5% in the year. It has increased by nearly 8% in 2021 and, in recent weeks, has been trading at record high levels. Nevertheless, the shares continue to trade at a discount to NAV, and the Directors firmly believe that the share price still does not fairly reflect the value of the Company's assets or, importantly, its prospects, and we remain focused on narrowing the discount further.
We believe the share price represents a very attractive entry point for investors to gain exposure to high quality private companies. Most of the independent directors have purchased further shares in the last seven months, amounting to 99,649 shares in aggregate including purchases by their immediate family members2.
Dividend
The Board recognises that a reliable source of income is important to shareholders and is committed to distributing 3.0% of NAV to shareholders through a semi-annual dividend. In line with this commitment, $0.58 of dividends were paid to shareholders in 2020, a yield of 3.6% on the year-end share price.
Commitment to Sustainable and Responsible Investment
In August 2020, NBPE adopted a formalised ESG policy around responsible investment practices and sustainable investing. NBPE's policy is centred on delivering better investment outcomes through the consideration of ESG factors for assessing investment risks and opportunities.
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- Assumes re-investment of dividends at the closing NAV on the ex-dividend date.
- 10,333 of these shares were purchased in February and March 2021.
31 December 2020 | Annual Financial Report
The Manager has followed an ESG-integrated private equity investing policy since 2007, and while the NBPE policy was implemented in 2020, this was simply the formalisation of ESG Investing policies adopted by the Manager for some time. As a result, the portfolio has been constructed over the long-term with these processes in place and therefore the vast majority of the existing portfolio is positive or neutral. Neuberger Berman has been a signatory of the Principles for Responsible Investment ("PRI"), since 2012, and in its 2020 PRI Assessment, the Manager obtained the highest score, A+, for its overarching approach to ESG strategy and governance.
Board Evolution
Peter von Lehe, Managing Director and Head of Investment Solutions and Strategy at Neuberger Berman, will not stand for re-election at the forthcoming AGM in September. Peter has been a member of the board since the Company's inception in 2007, and on behalf of the Board, I would like to thank him for his contributions over the past 14 years. Peter's commitment to NBPE will remain unchanged in his capacity on the Investment Committee of the Manager and as Managing Director of Neuberger Berman and we look forward to continuing to work closely with him.
Accordingly, the board is going through the process of a new independent director search and further information will be announced in due course. Following this exercise, the board will comprise five independent directors.
Investor Relations Initiatives
Beginning in 2019, the Board and the Manager began an effort to increase the Company's profile among new and existing investors by expanding investor relations initiatives. While the impacts from COVID- 19 resulted in a pause in early 2020, these efforts resumed in the latter part of the year. The Manager and the Board are currently accelerating these initiatives further, with the ultimate goal of increasing interest in the Company's shares.
Outlook
NBPE's 2020 performance is a demonstration of the quality and strength of the underlying portfolio.
Looking forward, market conditions for private equity, especially in the U.S., remain robust. NBPE's portfolio continues to produce impressive performance both in terms of growth and realisation potential and a strong pipeline of interesting investment opportunities is developing. While there remains some uncertainty about the long term macroeconomic impact of the pandemic, we believe the portfolio is well- positioned to continue to generate significant value for shareholders.
William Maltby
Chairman
20 April 2021
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NB Private Equity Partners Limited
INTRODUCTION | OUR INVESTMENT OPPORTUNITY | 31 December 2020 | Annual Financial Report |
Our Investment Opportunity
Investing in private companies to generate long-term growth
A portfolio of direct investments in highly attractive private companies
- Primarily invested in the US, the largest, deepest private equity market
- Diversified across sectors, underlying private equity managers and size
- Benefitting from the skills and valuation creation initiatives of the private equity manager to drive value in the underlying companies
A strategy focused on co-investing alongside top tier private equity managers, in their core areas of expertise
- Leveraging the strength of Neuberger Berman's platform, relationships, deal flow and expertise to access the most attractive investment opportunities
- Control of capital deployment through co-investments
- Typically investing on a no management fee or carried interest basis
A highly selective and responsible investment approach
- A focus on sectors and companies that benefit from long term structural growth trends
- Underpinned by a strong focus on responsible investment, with ESG considerations fully integrated into the investment process
Strong Performance
- 17.9% Gross IRR from direct equity portfolio over five years
- 17.0% Gross IRR on realised direct equity investments - 2.1x multiple of cost since inception
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Note: As of 31 December 2020.
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NB Private Equity Partners Limited
INTRODUCTION | INVESTMENT MANAGER
Investment Manager Overview
NBPE is managed by NB Alternatives Advisers LLC (the "Manager" or the "Investment Manager"), the private equity group of Neuberger Berman, which manages over $70 billion of private equity assets across multiple strategies.
Over $70 | Secondaries |
Billion | $13 bn(1) |
Primaries $26 bn(1)
Direct Private Credit
$5 bn
Direct Specialty
Strategies
$7 bn
The board has delegated to the Investment Manager the day-to-day management and operations of the Company, including sourcing, evaluating and making investment decisions related to the Company and executing the Company's investment strategy.
31 December 2020 | Annual Financial Report
Private Equity Assets Managed
$70 Bn
Across Multiple Strategies
Team
150+
Team Members working on primaries and co- investments
Experience
24 years
Average experience among senior leadership team
Industry Recognition
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See endnote one related to AUM and Awards.
1. Includes estimated allocations of dry powder for diversified portfolios consisting of primaries, secondaries, and co-investments. Therefore, amounts may vary depending on how mandates are invested over time.
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NB Private Equity Partners Limited published this content on 21 April 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 21 April 2021 06:07:02 UTC.