Farid Moeinifar’s Post

Why Invest in Private Markets? #ThoughtLeadership from Scott McClatchey @ Ballast Rock Private Wealth "It’s certainly an exciting time for accredited investors wishing to implement institutional-style portfolios, now that many of the largest and most respected private firms are democratizing some of their flagship funds, providing accredited retail investors access to private asset classes heretofore unavailable." #PrivateWealth #WealthManagement #RealAssets #PrivateMarkets #AlternativeInvestments #Alts #UHNW #HNW #FamilyOffices #IBD #RIA #PrivateCredit #PrivateDebt #PrivateInvestments #AdvocatesforRealAssets

Private equity is set to experience unprecedented growth, with assets projected to reach nearly $12 trillion by 2029. This expansion is driven by investors like family offices, private banks, and wealth managers — but that’s not the whole story. As institutional investors hit their limits, private equity firms are now creating inclusive funding options to widen access. New fund structures with lower investment minimums are opening doors for individual investors. Read on to learn how these shifts are shaping private equity's future: https://lnkd.in/gXCKc7HY  

Private equity is on track to more than double its current assets, reaching an estimated $12 trillion globally within the next six years, according to Preqin. This growth will be driven largely by individual investors, as wealth managers, family offices, and private banks increasingly step into the space. Historically, private equity has been dominated by institutional investors like banks and pension funds, but the landscape is changing. Key drivers of this shift include: - High returns with lower volatility - Diversification from public markets - Increased participation in private companies as IPOs slow Full article linked below ⬇️ https://lnkd.in/dA72PCA2

Private equity investments by individuals are expected to propel the growth of the sector to nearly $12 trn—more than double its current asset level—within the next six years, according to research by Preqin, a London-based provider of private-market data. #privateequity #investment #wealth #wealthmanagement

The Last Thing Private Markets Need is More Capital ************ "That's the dilemma we face. Over the next 15 years [in private equity], instead of having these beautiful fields and orchards to ourselves, there is going to be a lot more money and a lot more competition. One has to predict that it's going to be much tougher for endowed institutions to preserve their performance advantage." -LAURIE HOAGLAND, former CIO of the Hewlett Foundation ************ The Fall 2024 issue of the Museum of American Finance's Financial History magazine will feature an article on the history of alternative investments. It is tentatively titled "A Forty-Five-Year Flood." The flood began in the summer of 1979 when the Department of Labor tweaked its interpretation of the Prudent Man Rule in response to pressure from the emerging venture capital industry. Like many events in financial history, this initially made a lot of sense. After World War II, the U.S. had a unique opportunity to commercialize war-related technologies, but the banking system was skittish due to the scars of the Great Depression. This opened a gaping hole in capital markets, and VC firms could fill it. By the early 2000s, however, VC firms were flooded with capital, as institutions sought to replicate the "endowment model" of investing without considering the critical role of exceptional talent and timing. The VC experience is very much an archetype for all alternative asset classes. It begins with a temporary hole in capital markets. Early capital providers enjoy exceptional returns as the demand for capital far exceeds supply. But after witnessing these returns, followers soon flood the new asset class with fresh capital. Much of the new money is captured by new, unproven fund managers. Before long, both talented and untalented fund managers lament how difficult it is to find attractive deals. In his opening quote, Laurie Hoagland correctly sensed that private equity had entered this undesirable late stage of the cycle. The linked article in Pensions & Investments is just one example of how the flood of capital into private assets is deepening. If the opportunities were scarce in 2008, just imagine how scarce they are in 2024. Attempts to attract even more capital by targeting defined contribution plans are counterproductive for both the industry and plan participants. Plan sponsors should beware of such overtures from large private asset firms. These asset classes are already swamped with excess capital; future additions are much more likely to benefit asset management firms rather than your beneficiaries. AWMA®Kathleen McBride, AIFA®, CEFEX Analyst Tim McGlinn, CFA, CAIA Robin Powell Matteo Binfarè Larry Pollack Brian Schroeder, MSc. Cathleen Rittereiser Defined Contribution Institutional Investment Association (DCIIA) Mitch Bollinger, CFA, CAIA Tom Abraham #alternativeinvestments #privateequity https://lnkd.in/dZwxqUa9

Mark Higgins, CFA, CFP® Love the Laurie Hoagland quote. Looking forward to reading the forthcoming article with the working title of “the Forty-Five Year Flood’ to which you refer. Based upon your preview, I’m guessing the metaphor of a 45-Year Flood is synonymous with a rising tide. A tide that has had far reaching consequences beyond the realm of venture capital as your “archetype for all alternative asset classes” reference indicates. It certainly influenced the traditional long-only space as well. The multi-decade longevity of the flood distorted perceptions. One by giving its influence an air of permanence, but permanent no more. Presumably, the forthcoming article will proclaim the demise of the 45-Year Flood and the subsequent receding of the flood water from the high-water mark. Industry practitioners that thrived with a one directional tide, should now examine fresh perspectives and differing approaches for garnering adequate investment results sufficient to meet their funding hurdles and spending requirements. Status quo benchmark-sensitive approaches whose results are typically tethered to the future performance of a market index, are not likely to succeed as flotsam on waters withdrawing from their highs.

Future returns are dependent on the price you pay today. Investors, looking in rearview mirrors, want yesterday’s returns. however, the increased flow of excessive new money drives of prices which would imply lower future returns.

𝐓𝐡𝐞 𝐟𝐢𝐧𝐚𝐥 𝐩𝐨𝐬𝐭 𝐨𝐟 𝐨𝐮𝐫 𝐏𝐫𝐢𝐯𝐚𝐭𝐞 𝐄𝐪𝐮𝐢𝐭𝐲 𝐬𝐞𝐫𝐢𝐞𝐬: 𝐝𝐨𝐞𝐬 𝐏𝐄 𝐦𝐚𝐤𝐞 𝐬𝐞𝐧𝐬𝐞 𝐟𝐨𝐫 𝐲𝐨𝐮? In my opinion, here's the key sentence: "Outperformance or not, it’s always good to consider whether there is an easier - and perhaps, less risky - way to achieve your investment objectives." Often times, we see client portfolios heavily skewed towards higher-risk, illiquid alternatives (PE, VC, to some extent Real Estate) - and then this high risk exposure is balanced with a huge pile of cash. In total, you're likely to achieve similar returns on your total wealth as you would by sticking to a much more diversified liquid portfolio. In addition, clients often underestimate the additional workload that comes with investments in the alternatives space. #privateequity #privatewealth #familyoffice #moneytips #excentrica

Gathering in London from 28 to 30 May, the Sovereign Wealth Fund Institute, representing organisations collectively in charge of trillions of dollars of funds, will be meeting for a global wealth conference. SWFs are state-backed and controlled entities, yet they have (some) similar characteristics of large family offices. Typically, they must invest for the long term; they can be large acquirers and holders of illiquid assets. On the other hand, with SWFs in democratic states, such as Norway, there are limits to how much freedom of action they have. In other countries, however, there is considerable latitude. Some of the changes in investment thinking that family offices are acquainted with have also affected SWFs. And these big funds can also hold stakes in the kind of banks and wealth managers that readers might work for. There are, in short, crossovers between family offices and SWFs. WealthBriefing interviewed Lakshmi Narayanan, chairman of the Institute, about the conference, the Institute’s thinking, and thoughts about wealth management. Read more in the article below. https://lnkd.in/d7Fj9QPZ #gwc #globalwealthconference #gwcbyswfi #economics #investing #leadership #unitedkingdom #london

Private equity is dealing with a tricky catch-22 situation stemming from its own success. A recent McKinsey & Company analysis shows that fundraising fell 22% across private market asset classes globally last year to just over $1trn. And yet recent surveys indicate that the majority of LPs plan to maintain or increase allocations over the medium to long term. So, what gives? Something we’ve touched on in the past is the lesser-discussed numerator effect. Like the denominator effect, which sees investors become overallocated to PE by virtue of a fall in the value of their stock and fixed-income assets, the numerator effect is also an overallocation phenomenon. However, unlike the denominator effect, it comes from PE portfolio valuations increasing. The result is the same: target allocations become out of whack. Over the past year, the denominator has made a strident recovery. The problem is this has done nothing to bring allocations back in line with targets. McKinsey notes that LPs started 2023 overweight, citing analysis from CEM Benchmarking Inc. showing that average allocations across PE, infrastructure, and real estate were at or above target allocations as of the beginning of the year. Over the course of 2023, a lack of exits and rebounding valuations drove fund NAVs higher, pushing the numerator up. This can have a profound impact on LPs’ commitment plans and therefore fundraising. McKinsey and StepStone Group have found that an overallocation of just one percentage point can reduce planned commitments by as much as 10-12% per year for five years or more. It’s no wonder then that fundraising has been so challenging for the majority of PE firms. This also goes some way to explain why the secondary market has been frenetic of late. Stock markets have for the most part rebounded strongly. It’s just that PE NAVs have surpassed this rebound, prompting institutional investors with strict allocation targets to use secondaries as a way to manage off-kilter portfolios. Read McKinsey & Company analysis: https://lnkd.in/ghWMY5Q #PE #privateequity #secondaries