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property funds that invest in shares, as those funds have outperforms publicly traded shares and has a low
a strong correlation to the stock market. However, it’s correlation to public markets.
important to remember that the term 'outperformance'
can refer to losses as well as gains – ie a fund that returns In our view, this makes a private equity fund the best
a negative 6% has 'outperformed' a fund that shows a investment for a private investor as it offers better
negative 11% for the year. liquidity – in the same way as a fund-of-hedge-fund. You
can buy and sell shares in a private equity fund, usually
The second type of property fund, an ‘indirect’ fund, on a set date each month, making it much more flexible
buys shares of companies that directly invest in property than investing directly in a private company and having
and in a rising stock market, are likely to outperform to keep the cash for many years.
‘direct’ funds.
In summary, as an investor you can gain substantially
PRIVATE EQUITY from an investment in alternative assets, while still
Private equity is the common term for investments in diversifying your risk. And although there are higher
non-public companies. It is a growing asset class that’s risks associated with alternative assets, this is often
available worldwide. It’s becoming increasingly blown out of proportion by the media highlighting
important as a method of funding for companies seeking individual failures among thousands of perfectly good
investment at any stage of their life cycles as it offers the strategies. Not all hedge funds are high risk and quite a
means to raise money quickly and easily. Therefore, it is few are actually very cautious. The same can be said for
also a way for high net worth investors to gain access to property funds – direct property funds can provide a
potentially profitable companies that are not listed on a steady income and private equity allows you access to
stock exchange. companies not on the stock market. So, include
alternatives in any portfolio to help with diversification,
Increasingly, large public companies and the usual result is a reduced overall risk and more
are being privatised. The advantages consistent returns, over time.
for the companies themselves are that
they are free from the formal regulation of
the public market and can be run more
efficiently because there are no short-term
reporting requirements for shareholders.
This benefits the investor in that they are
therefore more able to realise larger
returns and private equity
20/20 fifteen
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