‘We misjudged Amazon and lost cash backing retailers’

For the average investor, buying unquoted stocks is not straightforward. This is the realm of private equity firms, traditionally the preserve of the super-rich who can afford the hefty management fees and large amounts of cash required upfront.

In 1987 the Pantheon International investment trust, valued at £1.5bn today, gave the man on the street a chance to own private companies at a lower cost and with minimum hassle. The London-listed fund is the oldest of its type in Britain. It also defies the image of private equity being traded in dark rooms by men in suits: women make up nearly half of its board members.

Its manager, Helen Steers, has run the fund since 2015. She tells Telegraph Money how private companies add something special to an investment portfolio and why understanding the pace of digital disruption to the economy will be vital for the fund’s future returns.

WHAT DOES THE FUND DO?

The fund invests in other private equity funds and in private companies.

It is a kind of fund of funds, which means we use our expertise to pick the best private equity managers out there and build our own diversified portfolio of investments.

We put a third of the money we run into new funds – so we can get access to the best private equity managers. Another third is in what we call “secondary investments”, where we buy stakes in private equity funds from investors who want to sell. It’s a bit cheaper to do this and there are still a lot of exciting opportunities.

The other third is invested in companies directly, which means we don’t pay a fund management fee and we keep all the profits for ourselves.

This leads to much higher returns when we get it right.

Investing in unlisted stocks can boost returns – but getting it wrong can be costly, Pantheon’s Helen Steers tells Sam Benstead

WHY SHOULD INVESTORS OWN PRIVATE COMPANIES?

Private companies are exciting because they offer greater opportunities for growth than their publicly listed peers. They tend to be younger businesses that are at the cutting edge of technological change. The flipside is that they have a bigger chance of failing or underwhelming.

Some investors have to queue up to get access to the funds that we own but we have been running the portfolio for more than 30 years and have strong relationships with the best managers, so we are first in line to invest in the best companies.

WHAT DO THE FUNDS YOU BUY OWN?

Technology companies make up the biggest sector the fund invests in. We want to profit from the next wave of innovation so we own stocks like CallRail, which is a phone analytics company, as well as digital bank Revolut. Digitalisation is a key theme throughout the funds and companies we buy.

Healthcare is the next biggest area. We know populations are getting older and living longer and this will drive demand for healthcare. One holding is Colisee, which operates retirement homes in France.

We also like consumer companies,

particularly those embracing new technology. British food delivery company Deliveroo is a holding in the fund, for example.

We pay attention to picking the right managers as well as the right investment themes. We are looking for experts who have great knowledge of a business area so that they can pick the right company to buy and then go in and make positive changes to the business and improve returns.

£1,000 invested in 1995 would be worth £11,810 today

WHAT’S BEEN YOUR BEST INVESTMENT?

It is difficult to pinpoint the best but one of our recent winners has