In 2024, the private equity landscape appeared to bounce back, witnessing a revival in deal-making activity. However, despite these signs of recovery, investment trusts like Pantheon International continue to face significant discounts.

The FTSE 250 investment trust, frequently referred to as Pip, ranks among the largest in its field. As of November 2024, 55% of its portfolio was directly allocated to companies, with the other 45% invested in various funds. A majority of its assets are linked to buyouts, while nearly 20% of its net asset value (NAV) is tied to growth-oriented businesses.

Pip’s portfolio shows a broad geographical range, with over half of its investments situated in the United States. The technology and healthcare sectors collectively comprise more than 50% of its holdings.

The fund has navigated through challenging periods in private equity. After a record-setting year in 2021, the subsequent years saw a decline in both investments and exits. Though there was some recovery in 2024, fundraising efforts decreased as the year progressed.

Bain & Company noted in March that the retreat in fundraising was to be expected, attributing it to significant capital withdrawals fueled by the 2021 deal-making surge, followed by a sharp decrease in exits due to rising interest rates. This downturn in distributions has led investors to reconsider their new investments.

Unfortunately, Pip has not been immune to these challenges. Its discount to net asset value has dramatically increased from approximately 15% in 2022 to a staggering 45% currently.

In response to these issues, the fund took a proactive stance in 2023, adopting a strategy centered on prioritizing shareholder interests, which included a revised capital allocation policy. Pip initiated a significant one-time share buyback plan up to £200 million and established a tiered buyback mechanism that activates when its shares are traded at specific discounts to its NAV. Notably, the fund does not issue dividends.

Evidence suggests that this strategy has effectively narrowed the discount. In May 2024, share buybacks contributed to a nearly 4.7% increase in NAV since March, after investing £197 million over the previous year, including a £150 million tender in October.

For the nine months ending February 28, 2025, Pip announced that it had utilized £15.5 million in share buybacks, with an additional £35 million earmarked for buybacks to be deployed by the end of May, bringing the total buyback allocation for the financial year to £50 million.

Analysts from Deutsche Numis acknowledged that while buybacks might not completely resolve all issues, they remain a valuable instrument in the investment strategy toolbox.

Pip is also working on improving its governance by appointing three seasoned private equity veterans—Tim Farazmand, Candida Morley, and Tony Morgan—as non-executive directors at the beginning of 2025.

Moreover, the investment trust plans to roll out a new strategic marketing initiative ahead of its annual shareholder meeting, typically held in October, aimed at attracting fresh investors through enhanced transparency, education, and sector-focused initiatives. The trust seeks to appeal to both individual investors and financial advisers.

However, addressing Pip’s persistent discount will likely require more than just an expanded board and new marketing materials.

Charlotte Morris, co-manager of the fund, has recognized the impact of US tariff negotiations on the market. While the year began with promising indicators, recent developments have posed setbacks.

Fortunately, the fund has a favorable exposure to US domestic businesses that are less dependent on external supply chains. Its core sectors of healthcare and technology are more resilient compared to others, according to Morris.

The portfolio limits its exposure to technology hardware, consumer retail, and has no investments in the automotive sector, which has been adversely affected by US tariff policies.

As improvements in broader markets may be essential to further narrow the discount, this situation could offer an enticing entry point for investors looking at a trust known for delivering solid capital returns.