# NB Private Equity Partners advantage in co-investment private equity

- Link: https://www.directorstalkinterviews.com/nb-private-equity-partners-advantage-in-co-investment-private-equity/4121174428
- Published: 2024-10-15T14:58:18+01:00
- Author: Amilia Stone

In our initiation, we highlighted that **NB Private Equity Partners Ltd** (LON:NBPE)
uniquely focused in the co-investment sector of PE. Our report underlined why this
sector has especially appealing return, cashflow, asset selection, risk management,
and GP access characteristics. In this note, we review how the manager, NB, adds
value in this attractive market. _Inter alia,_ NB has i) the resources to understand
the investee company dynamics, ii) excellent GP relationships and iii) experience/
skills that add value to the GPs. Its success is evidenced by the growing deal flow
in a subdued PE market. Also, NB is focused on the mid-market, which, in our view,
has more value creation options than large deals.

 * **Evidence of value added:** We highlight NB Private Equity Partners’ i) growing
   number of co-investment opportunities (3x the level of 10 years ago, in a slowing
   market), ii) above-peer investee company revenue and EBITDA growth in 2023, iii)
   broad spread of this growth, and iv) above-average 5-/10-year shareholder returns.
 * **NB’s value added to co-investments:** NB’s platform is large (NB Private Markets
   $115bn of active capital commitments, incl. $37bn in co-investments and over 
   400 PE staff), generating the scale to optimise the co-investment process. The
   deal completion rate (ca.8% of opportunities presented) shows great selectivity.
 * **Valuation:** The 25% discount is slightly below most direct peers (average 
   28%, exc. HGT), but it rose sharply in 2022, to well above historical levels (
   10%-15%). In this note, we review what may lead to a reversion to these levels.
   The discount appears absolutely and relatively anomalous with a resilient, conservative
   NAV.
 * **Risks:** Sentiment to costs, the cycle, residual positions in highly rated 
   listed companies following IPOs in 2020-21, the duration of the discount and 
   valuation are the key issues for NBPE, as they are across the whole listed sector.
   In our view, they are sentiment issues, and do not reflect reality, as we see
   it. The benefits from the current strategy may not yet be fully appreciated.
 * **Investment summary:** With 97% of the portfolio invested in direct equity, 
   co-investments, NB Private Equity Partners is the most focused listed vehicle
   in the low-cost, attractive co-investment subsector of the market-beating PE 
   sector. The company and GP selection have proved resilient in downturns, and 
   consistent, large premiums on exit should give investors comfort in the NAV. 
   Its portfolio is diversified by name, sector, GP, geography and size, but it 
   has enough concentration for individual investments to add value. The discount
   is anomalous with long-term, market-beating returns.

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