Displaying items by tag: private equity

(New York)

One of the things the growing ETF markets lacks is many options regarding private equity, and with good reason. The returns of the sector are hard to reproduce with publicly traded stocks. But getting private equity returns can be difficult to attain anyway because of the challenges of investing in the sector, especially for investors who are not at the wealthiest end of the spectrum. However, there are two newish ETFs on the market, BUYN and BUY, which use an investing methodology developed at Harvard to try to replicate the returns of the private equity sector. The provider is SummerHaven, who comments about their funds that “We believe that these ETFs based on our private equity strategy indexes will provide investors with an opportunity to access returns comparable to an asset class that has traditionally only been available through private markets, with the added benefit of liquidity and transparent and without lockups, vintage risk, investment minimums or takeover premiums. These ETFs will allow both retail and institutional investors an opportunity to access private equity strategy returns at substantially lower fees”.

FINSUM: On paper these sound like an interesting option, but only time will tell if the strategy actually achieves what it says. The ETFs are especially unproven because the Harvard paper which underpins the strategy was only published last year.

(Los Angeles)

A term which is anathema to the ears of real estate developers and landlords is once again rearing its head—rent controls. A push for localized and state rent controls is mounting across the country and the battleground appears to be in California, which is set to vote on a number of such measures. Mid-sized and large cities have been seeing double digit percentage annual rent increases for years, which has led to an incredible pushback from tenants. A number of ballot measures would give local governments across the country significant power to control rents.

FINSUM: It has been a long time since these policies were last in force in a major way, and the collective memories of their downside seems to have been forgotten. All that said, this push is a reaction to the huge investment in housing that private equity firms made following the Crisis. Since then they have raised rents aggressively, which has led to this inevitable grass roots push.

(New York)

Many investors are constantly on the look out for the next bubble. Well there is a new one right before their eyes, but many are not seeing it. Leave stocks and bitcoin aside for a moment, and look at private equity. Many say the current market is just like the Dotcom bubble, with valuations way too high and way too much optimism on growth and business models. “It is quite amazing that there is no collective memory that goes beyond five years” say an Oxford professor. Part of the problem is that fundraising has been really strong, which has led to more money flowing into companies, pushing up multiples. The other is the broad availability of debt funding for buyouts, with one industry specialist saying “These are unashamedly incredibly attractive conditions to borrow money. Will that debt be available to buyers in five years’ time? Probably not. Buyout groups are bullish to take the risk in 2018. It’s a ’risk-on’ environment”.

FINSUM: Aside from the reasons cited, the valuation of the stock market is another factor that is pushing up valuations. The sector looks likely to have a reckoning.