Rory O’Hara, CFP®, CRPC®, founder and senior managing partner at Ausperity Private Wealth, discusses the changing landscape of private market investments. In the past, only the super-wealthy could access this corner of the market due to legal restrictions and high investment minimums. However, this is changing, opening up opportunities for a broader range of investors.
Private investments are becoming increasingly popular for several reasons. They can provide generous income streams, diversify portfolios, and potentially capture added gains while limiting losses during market downturns. Given the recent performance of state pension allocations to private equity compared to public stocks and bonds, there is a growing interest in the sector among investment professionals.
Evergreen funds simplify the diversification process into the private market by investing in a collection of PE funds. While these investments come with higher fees and limited liquidity compared to publicly traded options, they offer benefits for investors looking to access the private market without making a significant commitment. Many evergreen funds have minimums as low as $50,000, making them more accessible than traditional private equity funds.
Unlike publicly traded investments, evergreen funds do not have a daily net asset value (NAV) and are re-priced monthly or quarterly due to the opacity of private equity investments. This can provide psychological benefits to investors by limiting the impact of market fluctuations on their portfolios. By diversifying across various industries and holding a multitude of components, evergreen funds can reduce the risk of crippling losses and limit idiosyncratic risk for investors.
While private market investments can be complex to understand, they are not necessarily riskier than traditional holdings like stocks. These vehicles can be client-friendly, providing transparency and reducing overall risk profiles. However, thorough due diligence is necessary to ensure success in this space. Investors should work with an objective and experienced financial professional to navigate the private market effectively and make informed investment decisions.
The information provided in this article is not investment, tax, or financial advice, and readers should consult with a licensed professional for advice tailored to their specific situation. Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning, and wealth management firms, offering valuable insights and resources for professionals in the industry.
