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Australia’s only listed portfolio of diversified global private market investments.
Positive returns as markets roiled by coronavirus fears

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An equity market correction at this point in PE1's investment cycle should be advantageous to the portfolio across all time horizons

Although private equity has historically outperformed public equity during times of economic stress because of the long-term nature of the investments*, this outperformance is normally not immediately seen. PE1 is slightly different.

Due to the design of its portfolio and stage in the investment cycle, the increase in NAV during February’s market turmoil should not have been a surprise to our investors. In fact, if the market correction continues, the portfolio could continue to benefit in a number of ways:

Short term credit provides additional upside
• Most of PE1’s cash is currently invested in investment grade liquid credit funds managed by PIMCO and TCW while waiting to fund investments in private equity. In times of stress, these credit assets may be expected to generate excess returns as interest rates adjust downwards. This was the case during the sell-off in February.

Further benefit from a falling AUD
• The private market assets of the Trust are USD denominated. During times of turmoil in the markets the AUD tends to weaken relative to the USD. AUD weakness will generate further positive returns for PE1 unitholders. The longer the volatility lasts, the more AUD weakness we can expect as investors favour USD investments.

Increased investment opportunities
• In the medium to long term, we believe that PE1 will benefit from this market disruption as PE1 (through Grosvenor and their private equity fund manager relationships) will have increased investment opportunities as well as lower acquisition prices. We  have seen that Private Equity investments made in the aftermath of the GFC returned positively, in excess of its returns during the pre-GFC and GFC periods, and in excess of returns generated by public equity*.

Cheaper secondary investments
• Market dislocations are likely to generate opportunities for PE1 to acquire funds on a secondary basis as existing fund holders look to adjust their allocations or become forced sellers of assets. Grosvenor have relationships with almost 500 primary fund managers and a team of 16 professionals dedicated to secondary investments who are ready to pounce on opportunities for PE1.


The Trust returned 2.9% for the month of February, with both short duration credit investments and co-investments contributing positively. The deterioration in the AUD as a result of market turmoil also contributed strongly to the return as the Trust’s private market investments are denominated in USD.

Over February, the Trust completed its first dedicated private equity secondary transaction – PE1 is already exposed to three secondaries via its opportunistic investments – with the purchase of interests in four funds managed by Alpine Investors at a discount of 7% relative to the 30 September NAV although in likelihood this discount is far larger, relative to current market valuations. The Trust also expects to execute further secondary transactions before the end of March 2020.

PE1 also completed commitments to its fifth and sixth private equity primary funds, being Wynnchurch Capital Partners V, L.P. (as detailed in our January update) and Riverside Micro-Cap Fund V, L.P. In addition, PE1 now has 23 opportunistic investments and 13 co-investments after adding two companies to each.

Values may not sum to 100% due to rounding.


PE1 completed its first private equity secondary transaction out of the dedicated PE Secondaries sleeve of the portfolio, Project Northstar, and is currently expecting to execute one or more additional secondary transactions before the end of the quarter. We note that PE1 already has exposure to three secondary transactions through the Opportunistic sleeve of the portfolio.

Project Northstar is a secondary investment in four funds managed by Alpine Investors, LP, a North America-based private equity firm that seeks to make control buyout investments in corporate carve-outs and founder-owned middle- and lower-middle market North America-based companies in the software and services sectors. GCM purchased the interests in the four Alpine funds (Alpine Investors III, IV, VI and VIII) at an aggregate discount to the 30 September 2019 NAV of 7%, although the discount is expected to be approximately to 20% relative to the 31 December 2019 NAV due to the strong performance of the underlying investments in those funds.

This transaction was consistent with our strategy of targeting niche secondary opportunities with difficult to access, strong performing managers who restrict secondary investors in their funds to investors who are also primary fund investors with such managers.

In addition to the information advantage we had as an existing investor with Alpine, we were able to leverage our existing relationship with the manager during due diligence in order to enable us to granularly assess the underlying companies in the funds and determine the appropriate discount to bid for the portfolio – this discount was based in part on our belief that there is reasonable potential upside within the portfolio that should help drive returns.


PE1 recently closed on its sixth private equity primary fund investment, a US$4 million commitment to Riverside Micro-Cap Fund V, L.P. (“RMCF V”).

Founded in 1988, the Riverside Company is a global private equity firm focused on acquiring companies in the smaller end of the middle market. The Riverside Company established RMCF V to invest in fast-growing, North American companies with generally less than US$10 million in LTM EBITDA (“micro-cap companies”) and seeks to grow the EBITDA of such companies organically and through add-on acquisitions. RMCF V targets what they consider to be high-growth companies with compelling value propositions, which often lack the institutional-quality resources required to reach their full potential. The firm aggressively seeks to unlock value by applying active strategic and operational expertise and by giving these companies access to the resources they need to enhance their growth. 

Through its core investment strategy of control buyouts, RMCF V will seek to create a diversified portfolio of approximately 12 to 18 micro-cap companies. The firm believes that its local, hands-on approach, supported by significant global resources, provides a distinct competitive advantage in generating attractive returns.


During the month of February, GCM Grosvenor Multi-Asset Class Fund II (MAC II) executed two new private equity investments, bringing the portfolio to 23 investments diversified across asset classes and industry sectors. One of the new investments in the MAC II portfolio, eResearch Technology, Inc. (ERT), is detailed below.

Founded in 1977 and headquartered in Philadelphia, Pennsylvania, ERT is a leading global cloud platform solutions provider to pharmaceutical companies and clinical research organisations throughout the clinical trial process. ERT is a leader in each of its three core business lines, which together represented 92% of ERT’s 2018 revenue:

  1. Electronic Clinical Outcome Assessment, which focuses on digitally collecting clinical subjective data from patients or clinicians through diaries or questionnaires that they complete during clinical trials,
  2. Cardiac Safety, which focus on collecting and centrally analysing cardiac function data using Electrocardiogram monitors in order to assess potential cardiovascular side effects of drugs, and
  3. Respiratory Services, which evaluates a patient’s lung function using specific devices such as spirometers in order to measure efficacy and safety of a drug. Over 55% of all new drug approvals in the past five years were supported by ERT.

MAC II co-invested in ERT alongside Nordic Capital, an upper middle market buyout manager with extensive experience in the healthcare sector and deep knowledge of ERT from its prior ownership of the company. In addition to Nordic Capital’s clear value add, MAC II pursued this investment opportunity due in part to:

  1. ERT’s market leading position in each of its three core business segments as well as the company’s growing footholds in a number of recently entered segments, including imaging and trial oversight, which are fast growing and present excellent opportunities for cross-selling,
  2. the company’s high revenue visibility and strong cash flow generation with actionable organic opportunities to expand capabilities and enhance service offerings, and
  3. the fact that the market is cycle-resistant with high barriers to entry and has been expanding at a rapid pace (which is projected to continue over the next five years).

In February, GCM Grosvenor Co-Investment Opportunities Fund II (GCF II) completed two new co-investments, bringing the well-diversified portfolio’s total to 13 co-investments alongside 10 different sponsors in six different industries. GCF II’s recent investment into Innophos, Inc. is detailed below.

Founded via corporate carve-out in 2004 and headquartered in Cranbury, New Jersey, Innophos is a leading global producer of ingredients, primarily phosphate-based, which are used across the food, health, nutrition, and industrial end markets.

GCF II co-invested in Innophos alongside One Rock Capital Partners (ORCP), a middle-market buyout manager with specialised expertise in the chemicals and process industries. GCM found this co-investment to be compelling for a number of reasons, including:

  1. Innophos is the #1 phosphate additive player in the highly stable North American food, industrial, and health end markets,
  2. there is a significant opportunity for material EBITDA improvement through the execution of operational efficiencies and pricing initiatives that have already been identified by ORCP, and
  3. ORCP has assembled a strong team with intimate working knowledge of Innophos, its chief competitor (ICL), and the phosphate industry at large.
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* Refer to Section 6.1 of the Product Disclosure Statement which can be accessed at

1 The NAV per unit is unaudited.

2 Past performance is not a reliable indicator of future performance, the value of investments can go up and down. The net return has been determined with reference to the increase in the Net Asset Value per Unit, as well as of the reinvestment of a Unit’s distribution back into the Trust pursuant to the Trust’s distribution reinvestment plan (“DRP”). Pengana has established a DRP in respect of distributions made by the Trust. Under the DRP, Unitholders may elect to have all or part of their distributions reinvested in additional Units.

3 The initial Net Asset Value per Unit for the purpose of determining the net return of the Trust is determined with reference to the initial public offering (“IPO”) subscription price, which was $1.25.

4 It is Pengana’s intention to pay $0.025 per unit for each six month period from listing though to June 2021 with the first distribution paid for the period ending 31 December 2019. Thereafter, Pengana intends to target a cash distribution yield equal to 4% p.a. of the NAV (excluding the total value of the Alignment Shares). The targeted distribution is only a target and may not be achieved. Investors should read the Risks summary set out in Section 11 of the PDS.

In reviewing the case studies / trade examples (“Examples”) provided in this presentation, you should consider the following:

This presentation does not purport to make any recommendations regarding, or to serve as a basis or analysis on which persons might make investment decisions regarding, specific securities, investment strategies, industries or sectors.  It is prepared for informational purposes only to provide background, data and topical comment on various aspects of the alternative investments industry. References to specific securities, strategies, industries or sectors contained in this presentation, whether successful or unsuccessful, are presented solely for illustrative and educational purposes only and should not be relied on in connection with making any investment decisions. The returns (actual or hypothetical) described in the Examples, if any, should not be taken as any indication of the performance of any investment in any strategy described herein. Further, potential outcome scenarios described in each Example represent only certain possible outcomes for the given trade. Additional outcomes may include severe or total losses.
References to “managers” or “investment managers” in this presentation are not necessarily to “managers” or “investment managers” of the underlying funds (“Underlying Funds”) in which one or more GCM Grosvenor fund or account invests. Where expressly noted, however, references to “managers” or “investment managers” in this presentation are to the subset of investment managers of Underlying Funds in which one or more GCM Grosvenor fund or account invests.

By accepting this information, you agree not to use it for any purpose other than evaluating your investment in a GCM Grosvenor fund or account. Moreover, the information may include material, nonpublic information relating to particular securities and/or the issuers thereof. Furthermore, you acknowledge that you may be receiving material, nonpublic information and that, under certain circumstances, applicable securities laws may prohibit the purchase and sale of securities by persons or entities who are in possession of material, nonpublic information relating to such securities and/or the issuers thereof. Therefore, it is possible that trading in securities and/or the issuers thereof which are the subject of information contained in this presentation may be prohibited by law. 
GCM Grosvenor obtains information about investment managers with whom GCM Grosvenor funds or accounts do not invest, either through direct communication with such investment managers or through third-party sources. In attributing particular outlooks, expectations or statements to “managers” or “investment managers,” GCM Grosvenor has relied exclusively on information communicated to it by such “managers” or “investment managers” or by third-party sources whom we reasonably believe to have reliable information concerning these matters. GCM Grosvenor has not independently verified such information and makes no representation or warranty as to its accuracy or completeness.

Pengana Investment Management Limited (ABN 69 063 081 612, AFSL 219 462) (“Pengana”) is the issuer of units in the Pengana Private Equity Trust (ARSN 630 923 643) (“Trust”). A Product Disclosure Statement for the Trust (“PDS”) is available and can be obtained by contacting Pengana on (02) 8524 9900 or from A person who is considering investing in the Trust should obtain a copy of the PDS and should consider the PDS carefully and consult with their financial adviser to determine whether the Trust is appropriate for them before deciding whether to invest in, or to continue to hold, units in the Trust.

This report was prepared by Pengana and does not contain any investment recommendation or investment advice. None of Pengana, Grosvenor Capital Management, L.P., nor any of their related entities, directors, partners or officers guarantees the performance of, or the repayment of capital, or income invested in the Trust.

Certain statements in this report constitute Pengana’s opinions on investment related matters. While Pengana has a reasonable basis for holding these opinions these do involve known and unknown risks, uncertainties, assumptions and other important factors, many of which are beyond the control of Pengana and which may cause actual performance or outcomes to differ materially from those expressed or implied by such opinions. To the maximum extent permitted by law, Pengana disclaims any obligation to disseminate any updates or revisions to Pengana’s opinions as expressed in this report.

An investment in the Trust is subject to investment risk including a possible delay in repayment and loss of income and principal invested. Past performance is not a reliable indicator of future performance, the value of investments can go up and down.
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