Last year, AVI CEO and CIO Joe Bauernfreund (pictured) told Investment Week that 'constructive activism always works better than being a bully'.
HarbourVest Global Private Equity trust (HVPE) has become the latest target of activist action with shareholder Asset Value Investors (AVI) criticising the company’s net asset value performance and persistent discount.
In an open letter addressed to the HVPE board today (23 January), AVI characterised the vehicle's NAV returns as "disappointing when measured over any period seven years or shorter", saying the trust has failed to achieve its objective of outperforming public markets over the long term.
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According to data from the Association of Investment Companies, HVPE has achieved a NAV total return of 4.4%, 9.9% and 89.8% over one-, three- and five-year periods, respectively, compared to the Private Equity AIC sector averages of 13.8%, 53.2% and 160% over the same timeframes.
The trust is currently trading at a 27.2% discount, which AVI noted was the highest among its peers – although AIC data shows that, among the Private Equity AIC sector, LMS Capital currently has the widest discount at 49.3%, with HVPE having the fourth largest in the sector.
At this level of discount, AVI said it was "implausible for there to be any new investment […] that offers higher returns than that available from buying back its own shares", adding that the 3.6% of share capital repurchased over 2025 was not enough.
AVI also criticised the leverage deployed by HVPE as well as the accuracy of its cash flow forecast.
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Although the activist investor commended the increase in the distribution pool for buybacks and the restructuring of the way in which it makes new investments going forward, it said further "significant initiatives" are necessary and should be explored "ahead of a potentially failed continuation vote".
It recommended one of two options to prioritise capital returns to shareholders.
Option one would mean no new commitments made until the discount has averaged 15% for a year, with proceeds from realisations split 70/30 between paying down the revolving credit facility and share redemptions at NAV.
Alternatively, the board could initiate a managed run-off, forming a dual share class structure where shareholders can elect for continuation or realisation.
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AVI further suggested HVPE run a formal sales process for the company, inviting parties including HarbourVest to submit bids to "set a benchmark by which all other options should be assessed".
Winterflood equity research analyst Shavar Halberstadt said he was not convinced by AVI's arguments, noting that funds "can still deliver excellent returns while on a discount" if that discount does not significantly widen.
"Over just the last five years, HVPE net assets have risen from $2.5bn on 31 December 2020 to $4.2bn as at 31 December 2025. We do not understand the sudden loss of patience, which should be the hallmark for any PE investor, particularly in a permanent capital vehicle that has produced excellent long-term returns, as intended.
"HVPE remains our top pick in the Fund of Funds sector for 2026," Halberstadt added.
Last year, AVI CEO and CIO Joe Bauernfreund told Investment Week that "constructive activism always works better than being a bully" and defended the role of activist shareholders who are "playing an important role in trying to narrow the discounts".
