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Petershill: Goldman vehicle can close value gap with better disclosure

Private equity has become a bit less private as buyout groups have raced on to the public market. One such was Petershill Partners, controlled by Goldman Sachs. This takes minority stakes in buyout funds and other alternatives vehicles. Investors have been wary. The UK-listed shares are down 20 per cent from September’s initial public offering price, even after a bounce of over 5 per cent following Wednesday’s strong maiden results.

Petershill stock has performed particularly poorly in a weakening sector. The S&P Listed Private Equity index has dropped just 6 per cent since September. It has fallen 13 per cent so far this year, anticipating a rise in interest rates. These would increase debt costs and lower exit multiples. Buyout groups would have to work harder to raise fresh funds.

Some private equity groups have bucked the trend. London-listed 3i’s share price is up by 5 per cent since September, helped by the strong performance of Action, the Benelux-based discount retailer which dominates its portfolio.

Petershill remains upbeat. It expects partner firms to raise more than $40bn in private capital markets this year. Their management fee income, which accounts for two-thirds of its revenue, is resilient too. Locked-up funds represent 87 per cent of assets under management and have an average life of more than eight years.

Investors still have to take a lot on trust. Petershill provides few details of its underlying investments, only averages. The business gives little detail about how operator Goldman Sachs Asset Management manages conflicts of interest. GSAM controls 75 per cent of the shares. It has not said how much it will sell as lock-ups start expiring.

Petershill reckons its book value was 339 pence per share at the end of 2021. The shares trade a fifth below that, at the bottom of the range among listed private equity groups.

The stock is therefore a cheap way to get diversified exposure to private equity. It is in GSAM’s own interests to improve disclosure and reduce the discount of its shares to their net asset value.

The Lex team is interested in hearing more from readers. Please tell us what you think of Petershill in the comments section below.

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