I keep seeing wealth managers promoting access to private equity. Why?
Wealth and asset managers are under fee pressure in traditional markets and see private equity as a way to secure ongoing fees… and they will say you can’t get access to private equity funds without us.
Your question is, why bother? Will private equity change your total returns that much? You’ll need to ask yourself how can you measure risk yourself if private equity cannot be valued fairly? It’s opaque. Liquidy is a problem.
We understand that investors can easily be drawn into private equity as the story sounds good. Someone who is very sceptical about the private equity industry is LUDOVIC PHALIPPOU, Professor of Financial Economics at the University of Oxford’s Saïd Business School. He said “Clearly there has been a bit of a fantasy growing over performance. In all the presentations you always see performance of private equity being good. That’s the number one argument used as to why you would invest in private equity. The real picture is not quite what it looks like, but people are being impressed by the performance figures.”
and “So you have here an asset class with tons of cash, where the fees are 7% a year. We have never seen such a high-fee asset class. When there’s so much money out there and so many conflicts of interest, you have all the ingredients for this to be bad.”
If you must invest in private equity, don’t use a fund, do it yourself. Otherwise, think about how you can get marginal returns by thinking differently.