NB Private Equity Partners (LON:NBPE) is the topic of conversation when Hardman & Co’s Analyst Mark Thomas caught up with DirectorsTalk for an exclusive interview.
Q1: Mark, before we jump in, your report, it sits behind the disclaimer. Can you just tell us why that’s there?
A1: It’s a very standard disclaimer that many investment companies have. In essence, for regulatory reasons, there are some countries, like the US, where the report should not be read. In the UK, because private equity is seen as not being a simple asset class, the report should be looked at by professional and qualified investors, but it’s a very standard disclaimer and nothing to worry about.
Q2: Now, you’ve called your recent piece, ‘2025 results: Looking to future realisations’, what can you tell me about that report?
A2: As expected, the NB Private Equity results to the end of December 2025 confirmed the really resilient operating performance of its investee companies, with average EBITDA growth of 9%. In our view, that strong EBITDA growth is the key driver to long-term value creation.
In the period, the NAV growth lagged EBITDA growth, with some rating compression in specific sectors, software is about 10% of the portfolio, as an example, and modest listed holding share price falls.
Going forward, their portfolio is mature and there are multiple market dynamics that are structurally favourable to increasing realisations over time. There is potential quarterly noise around global uncertainties, but putting that to one side, medium-term realisations look good.
Q3: Global uncertainties would be to make exits much harder, but you’re expressing considerable confidence in the outlook for them. Why is that?
A3: Medium-term realisations look strong with, in our view, five key drivers:
Firstly, NBPE’s portfolio is mature, so it’s exit-ready, and when conditions are good, it is a good stock of companies to sell.
Secondly, industry-wide dry powder is near record highs, following large fundraisers a couple of years ago and relatively modest deployment since. Now, over the next few years, that dry powder will have to either be deployed or returned to investors. Importantly, the dry powder is concentrated in larger firms who make them natural buyers for NBPE’s investments.
The third driver is that GPs are seeking liquidity because their investors want it.
Fourth, in our view, AI efficiency gains mean that many more deals may hit hurdle rates of return. Now, PE has a very good record of implementing digitalisation, and the effective implementation of technology is a core incremental benefit that PE managers bring to investee companies, and AI is just part of that journey.
The fifth driver is the PE market is highly dynamic, and new exit options have been created, such as continuation funds. Now, you’re quite right that in the short term, there’s likely to be noise with both weak and strong quarters. We saw weak quarters in the second quarter of both 2022 with the Ukraine and 2024 with Donald Trump’s tariffs, only for there to be very strong quarters in both years.
So, it won’t be a smooth path, but structurally, there are many reasons to believe in good realisations going forward.
Q4: What can you tell us about how NBPE’s updated capital allocation framework affects your views of the results?
A4: In November of 2025, NBPE announced an acceleration of its $120 million three-year buyback programme, an increase in the allocation to new investments with at least 100 million over the subsequent three to six months that has been delivered, targeting an investment level of 105-110% of NAV, and thirdly, maintaining the existing dividend policy, which targets an annual yield on NAV of 3% or greater. All of that was backed by good realisations.
Now, this policy was further updated in June of 2026 with the announcement of a further $120 million allocation to share buybacks over the next two years. What that means is the new funding takes the total allocated to buybacks over the past 15 months of $240 million, or 19% of the NAV.
Q5: What can you tell me about the risks?
A5: All investments carry risks. For NB Private Equity, its sentiment costs, the cycle, including potentially higher for longer interest rates, realisation volatility, the duration of the discount, and potential AI disruption to software businesses. Those are all issues for NBPE, as they are across the whole listed sector. To our mind, they are sentiment issues, and they do not reflect the reality as we see it.
