Investing in private equity funds

nick1234

JohnWinder said:

I wonder if you could specify any risk(s) you see with your current investment choices which should be reduced by diversifying into PE? That, of course, is my assumption that one would diversify to reduce risk. If you have another reason to diversify, such as PE has better returns (not wishing to put words into your mouth), could you tell us your reason(s)?

Thanks for the suggestions, hoping diversification means PE company values hold when the market is crashing like march/april 2020 as funds were falling PE doesnt seem to have been by as much.  But also hopefully larger gains in the long term due to more centration
I have narrowed it down to harbour invest, pantheon and 3i..just seems like a stab in the dark to pick one as the factsheets dont really list all underlying companies they invest in

Thrugelmir

nick1234 said:

JohnWinder said:

I wonder if you could specify any risk(s) you see with your current investment choices which should be reduced by diversifying into PE? That, of course, is my assumption that one would diversify to reduce risk. If you have another reason to diversify, such as PE has better returns (not wishing to put words into your mouth), could you tell us your reason(s)?

I have narrowed it down to harbour invest, pantheon and 3i..just seems like a stab in the dark to pick one as the factsheets dont really list all underlying companies they invest in

Many holdings in themselves will be sub PE funds containing individual holdings. 

jimjames

nick1234 said:

JohnWinder said:

I wonder if you could specify any risk(s) you see with your current investment choices which should be reduced by diversifying into PE? That, of course, is my assumption that one would diversify to reduce risk. If you have another reason to diversify, such as PE has better returns (not wishing to put words into your mouth), could you tell us your reason(s)?

Thanks for the suggestions, hoping diversification means PE company values hold when the market is crashing like march/april 2020 as funds were falling PE doesnt seem to have been by as much.  But also hopefully larger gains in the long term due to more centration
I have narrowed it down to harbour invest, pantheon and 3i..just seems like a stab in the dark to pick one as the factsheets dont really list all underlying companies they invest in

Problem is that the underlying holdings might hold but the vehicle holding them will follow the market, probably even more so. I know my holdings in PIN dropped over 50% in March last year. It was a great time to add to my holdings! I remember back in 2009 picking up some PE shares at massive discounts too. Look at the 3 year chart here
https://www.hl.co.uk/shares/shares-search-results/p/pantheon-international-ordinary-shares-67p

PE can be very volatile and go to large discounts on changes in sentiment. soI don't think it would be one to have if the aim is to smooth the fluctuations in the market.

Reaper

Voyager2002 said:

...the former Woodford Patient Capital (at a pretty spectacular discount) now run by Schroder's

I was intrigued to see how it has performed since. I gather it is now called Schroder UK Public Private Trust. I see the discount has narrowed recently allowing the share price to rise, however the NAV still seems to be sinking slowly.

It illustrates the benefits of buying at a large discount in the hope it will narrow but it doesn't tempt me to invest now.

Thrugelmir

Reaper said:

Voyager2002 said:

...the former Woodford Patient Capital (at a pretty spectacular discount) now run by Schroder's

It illustrates the benefits of buying at a large discount in the hope it will narrow but it doesn't tempt me to invest now.

Valuations of private companies are subjective. Until such time as the entity is publicly listed, sold to a third party, the investor is able to sell on their holding or goes bust. Then discounts are little more than a guide. 

ivormonee

A lot of the gains made from the individual underlying holdings feed into management and other costs, over and above the fees explicitly stated like the OCF and any performance fees, so I find private equity investment trusts a bit difficult to agree to. I've taken a direct route into private equity thereby cutting out all fees, management costs etc. completely. Literally. I feel better knowing that every penny of my money invested is actually invested and that I am not paying for managers' "excessiveness" (their bonuses etc. have to come from somewhere!).

LHW99

I put a very small amount last year into Harbourvest, to see how it performed, as its fees were a little lower than a couple of similar trusts I looked at. Its certainly been more volatile than other holdings, but I plan to stick with it longer term, and perhaps increase my holding on the dips.

JohnWinder

nick1234 said:

...hoping diversification means PE company values hold when the market is crashing like march/april 2020 as funds were falling PE doesnt seem to have been by as much.  But also hopefully larger gains in the long term due to more centration

Thanks, and to others. I'm feeling my way.

It seems PE allows one to widen the pool of businesses to invest in, beyond the listed to the unlisted. That would be good, but how much better I wonder, given the size and variety of the listed 'investment space' anyway. And then you face the headwinds that stock picking fund managers usually struggle to beat the broad market over longer periods; is choosing unlisted companies from the unlisted firmament any easier?

I'd worry that the fees, guaranteed and likely much bigger than your other options wouldn't compensate.

https://www.evidenceinvestor.com/how-good-an-investment-is-private-equity-honestly/

helpyhelper

If you have index trackers and etfs chances are you are diversified enough. Best don't add investments you are unsure of.

Thrugelmir

LHW99 said:

I put a very small amount last year into Harbourvest, to see how it performed, as its fees were a little lower than a couple of similar trusts I looked at. Its certainly been more volatile than other holdings, but I plan to stick with it longer term, and perhaps increase my holding on the dips.

Private companies are staying private for longer. As there's sufficient capital available to grow the business without the need to list the company on the public exchanges. More often or not now. Companies have already enjoyed much of their early stage gains, before investors look to exit their positions. By encouraging the company to list. 

Best example is Ant Group, Jack Ma's financial services empire. If it where to list now. In terms of market capitalisation would rank no 1 in the UK. PE isn't just about start up's.