Sitting on $963 billion means huge fees for the Promoters. They get paid in many cases even if they are slow in finding suitable investments. And they have every incentive to put this money to work, whatever the terms, as they are paid on the basis of 'we take (part of) the profits and you investor can keep the losses'. A veritable money-printing machine, built on the basis of leverage and an ever-rising stock market boosted by QE. And no one in the corporate governance and political crowd seems to take notice despite the rising discontent about executive excess in the public markets.
https://www.bloomberg.com//news/articles/2017-09-01/why-private-equity-has-963-billion-in-dry-powder-quicktake-q-a
Showing posts with label Private Equity. Show all posts
Showing posts with label Private Equity. Show all posts
1 September 2017
6 August 2017
'Private' Equity Performance data - how reliable?
Apart from the fact that the promoters control when and what is happening with the portfolio there is the overriding question of comparing apples (listed equity indices, based on actual real-time transactions) and oranges (prices determined in an opaque fashion, high leverage key to investment rationale).
So triumphant messages such as this one can only be considered public relations unless the data is made public (not just sold to subscribers) and the methods properly disclosed. After all, the real end investor has a right to be fully informed about what his fiduciaries are up to with his hard-earned savings!
http://www.cityam.com/269664/private-equity-investors-nab-their-highest-quarterly
So triumphant messages such as this one can only be considered public relations unless the data is made public (not just sold to subscribers) and the methods properly disclosed. After all, the real end investor has a right to be fully informed about what his fiduciaries are up to with his hard-earned savings!
http://www.cityam.com/269664/private-equity-investors-nab-their-highest-quarterly
Labels:
Performance,
Private Equity
14 April 2017
Fees on Alternatives expensive - Report
While Alternative Investments may offer good diversification they are unfortunately priced too expensively to offer a good risk/reward ratio. Performance - esp in Private Equity - may look attractive but remember that we experienced a long bull market that lifted all (asset) boats.
Complex Investments in Alternatives expensive
Complex Investments in Alternatives expensive
Labels:
Alternative Investments,
Fees,
Hedge Funds,
Performance,
Private Equity
29 March 2017
Hedge Funds - not perfect, but objective criticism please!
Claiming that Hedge Funds are expensive and offer poor performance is cheap criticism. Long-only Fund Managers are also in the firing line over poor (relative) performance and high fees. Hedge Funds 'suffer' from the fact that a long bull market makes it easy to outperform any 'hedged' fund. The real test has to be over a whole cycle - from peak to peak over one full bear and bull market. And by the way: levered 'Private' Equity Funds escape scrutiny as their performance numbers are not bandied about in the media - not to mention the often excessive compensation that the management of the companies they are invested in enjoys. So-called 'Absolute Return' Funds are now often sold on the premise that they solve the problem - neither too much hedged, but not fully exposed to market cycles - but their performance and fees are also not all that attractive.
http://www.marketwatch.com/story/hedge-fund-buyers-are-getting-soaked-2017-03-29
http://www.marketwatch.com/story/hedge-fund-buyers-are-getting-soaked-2017-03-29
Labels:
Absolute Return,
Fees,
Hedge Funds,
Performance,
Private Equity
9 January 2017
High Fees? Hedge Funds not the only suspects!
Many comments are made about high fees charged by Hedge Funds. But before you jump ship you should keep in mind that Private Equity or Traditional Funds are not necessarily cheaper. The Hedge Fund concept per se does not mean that the 2+20 fee structure is set in stone. It is a choice that the providers give the investor and you are free to shop around.
But Private Equity Funds are also charging a not inconsiderable management fee and take a cut from the fund's performance. And when you invest via a Private Bank or Financial Adviser you quite often are paying a fee to them as well as a fee for the underlying investment vehicles they allocate your investment monies to.
You need to take special care and advice when awarding a management mandate to any Wealth Manager and get a clear analysis of the impact of fees on future performance!
https://www.bloomberg.com/news/videos/2017-01-04/why-asia-s-richest-families-are-dumping-hedge-funds (Bloomberg)
But Private Equity Funds are also charging a not inconsiderable management fee and take a cut from the fund's performance. And when you invest via a Private Bank or Financial Adviser you quite often are paying a fee to them as well as a fee for the underlying investment vehicles they allocate your investment monies to.
You need to take special care and advice when awarding a management mandate to any Wealth Manager and get a clear analysis of the impact of fees on future performance!
https://www.bloomberg.com/news/videos/2017-01-04/why-asia-s-richest-families-are-dumping-hedge-funds (Bloomberg)
Labels:
Fees,
Financial Advisers,
Hedge Funds,
Private Banking,
Private Equity
29 May 2016
End of Hedge Funds?
Gloom and Doom may work for Marc Faber but it should not overshadow rational analysis of the Hedge Fund Industry.
Performance comparison with the S&P means to compare apples with oranges. And there are many different strategies that all have to be looked at from a different angle.
Costs have - and continue to be - high and it is not clear why megafunds should be able to charge fees of up to - and in extreme cases more than - 2 percent and at the same time charge performance fees of around 20 percent, often without application of any reasonable hurdle rate.
What has to - and will - happen is that the structure of traditional asset management and hedge fund management will slowly get unified.
Exceptional managers may be able to receive higher fees, but even in the traditional asset management space there is a wide variety of fee levels that investors seem to be happy to accept.
Careful scrutiny will be the order of the day when looking for 'active' managers. The trend to passive investing may continue for a while longer, it will stabilise when the passive part of assets under management reaches the 60-70 percent range. Sharp competition for the remaining 40-30 percent of the asset management cake will lead to a compression of fees.
Performance fees - not only for hedge fund managers, but also for private equity and other alternative fund structures - are problematic in any case. For good reason US regulators placed severe restrictions on their use until the mid-1980s. The way they are structured gives too much of a one way option for the providers of asset management services.
It may be the end of hedge funds as we know it (Business Insider)
Performance comparison with the S&P means to compare apples with oranges. And there are many different strategies that all have to be looked at from a different angle.
Costs have - and continue to be - high and it is not clear why megafunds should be able to charge fees of up to - and in extreme cases more than - 2 percent and at the same time charge performance fees of around 20 percent, often without application of any reasonable hurdle rate.
What has to - and will - happen is that the structure of traditional asset management and hedge fund management will slowly get unified.
Exceptional managers may be able to receive higher fees, but even in the traditional asset management space there is a wide variety of fee levels that investors seem to be happy to accept.
Careful scrutiny will be the order of the day when looking for 'active' managers. The trend to passive investing may continue for a while longer, it will stabilise when the passive part of assets under management reaches the 60-70 percent range. Sharp competition for the remaining 40-30 percent of the asset management cake will lead to a compression of fees.
Performance fees - not only for hedge fund managers, but also for private equity and other alternative fund structures - are problematic in any case. For good reason US regulators placed severe restrictions on their use until the mid-1980s. The way they are structured gives too much of a one way option for the providers of asset management services.
It may be the end of hedge funds as we know it (Business Insider)
18 October 2015
Private Equity fees a 'Trade Secret'?
Given the fact that all investment funds that are offered to the Public
are regulated in one way or another is should be noted that one
important aspect escapes the attention of the (usually overzealous)
regulators. When it comes to the transparent disclosure of management
and performance fees the end investor is usually left in the dark. His
fiduciaries in the pension funds, private banks or other intermediaries
may be able to dig deep into the agreements with the private equity
operators but when the end investor - who ultimately bears all the risk -
wants to have the full picture he is usually fobbed off with lame excuses (protection of 'trade secrets' one of the more popular ones).
Labels:
Private Equity,
Regulation
15 October 2015
Why Investors need to scrutinise all Fees
A Horrow Story of abusive fees-
Keep in mind that even the most prestigous Fund Managers or Private Banking names should not escape close supervision.
- Promised Services are not performed
- Overpay for Average Returns or Underperformance
- Management Fees based on inflated Asset Values
- Valuation Methods changed opportunistically
- Back-door Fees via non-independent Experts
- Detrimental Allocation of Profits due to Outperformance
- Performance Fees not calculated properly
- Non-Business Expenses charged to fund
- Transactions executed at false prices
Keep in mind that even the most prestigous Fund Managers or Private Banking names should not escape close supervision.
Labels:
Conflicts of Interest,
Fees,
Performance,
Private Equity
21 January 2015
Do you understand the fees that you pay for Private Equity?
If even very large institutional investors have difficulty understanding the various fees that are charged by Private Equity firms it should be obvious that any investor should have intense scrutiny performed before allocating any funds.
Labels:
Fees,
Private Equity
28 May 2014
Do you really understand your funds?
Looking at some Investment Agreements that were leaked one has to wonder how many investors really are able - or willing - to understand the nitty gritty contained in these lengthy documents. As the agreements referred to in this link cover investments by professional investors in Private Equity Funds they are drawn up by expensive lawyers in order to be read by expensive lawyers. But even where professional investors are involved we doubt that their ultimate paymasters - the trustees in pension funds for example - really bother to read the agreements from end to end. So any private investor has to be extra careful before handing over his hard-earned money to any investment adviser, however nice the offices are, however impressive his or her credentials or the brochures and presentations that are offered.
Labels:
Fees,
Financial Advisers,
Investment Funds,
Private Equity
11 August 2013
Alternative Investments for the Masses? - Treat with Extra Caution
When promoters of 'Private' Equity funds start waxing lyrical about the opportunities to invest in such vehicles that may soon be offered to the average individual investor one has to raise a word of caution. It is already difficult enough for investors to assess risk and rewards in 'traditional' asset classes such as bonds and equities. But 'alternative' assets such as Private Equity, Hedge Funds or Infrastructure Funds - while offering advantages and diversification on paper - are less transparent and usually come with higher management charges than their more mundane peers.
Labels:
Alternative Investments,
Fees,
Hedge Funds,
Private Equity
5 June 2012
Why is your Financial Adviser offering 'Alternatives'?
When being offered any financial product investors should always make sure that they really understand them and are not swayed by the sales pitch they get from a financial adviser. While the inherent risks in any product should be the main consideration there is also a need to have a good look at any fees associated with the product.
31 January 2012
Azentus Fund loses 6.70 % in first year
But assets under management are up. Need we say more? Nothing illustrates the need for careful fund selection more - and this applies to all investment funds, traditional, hedge or private equity.
Labels:
Fees,
Fund of Funds,
Hedge Funds,
Investment Funds,
Performance,
Private Equity