We continuously review private investment opportunities and share the ones that meet our underwriting standards with investors who have joined the network.
We allocate to specialist managers whose expertise and track record demonstrate an ability to produce strong returns in a specific market. We review the manager’s performance across multiple funds and market conditions to determine whether the results have been consistent rather than driven by one successful fund. When possible, we aggregate client commitments to negotiate lower fees.
Some opportunities are sourced directly rather than offered through an existing private fund. For these investments, we create a separate vehicle for the specific transaction, negotiate directly with the company or asset owner, and manage the vehicle until the investment is sold or repaid. Clients review each opportunity before deciding whether to participate rather than committing capital to a blind pool.
We adjust a fund’s expected return for fees, taxes, risk, and illiquidity before deciding whether the investment is attractive enough to recommend.
The supply of exceptional private investments does not increase simply because a manager raises a larger fund. To invest $30 billion instead of $3 billion, the manager must lower its standards and put money into companies and assets it would have rejected when the fund was smaller.
Half of a $30bn fund must be invested in companies and assets that would not have met the manager’s standards when the fund was $3bn.
What we do about it. We compare how much a manager plans to raise with how much the manager can invest while maintaining the same underwriting standards. When the next fund is substantially larger than the last, we require a clear explanation of where the additional capital will be invested and why the larger fund will not require lower-quality investments.
Figures are illustrative, not estimates of the private market opportunity set.
In a fund that offers periodic liquidity while holding investments that may take years to exit, the manager may need to raise cash quickly when investors redeem. The easiest assets to sell are often the strongest ones, which can leave the remaining investors with a weaker and less liquid portfolio.
What we do about it. We are cautious with funds that offer periodic liquidity while holding assets that can take years to sell. We want the liquidity terms to match the underlying investments.
We can discuss the types of private investments we evaluate, what we look for when underwriting them, and whether any of the opportunities we are seeing may be a fit for you.