There has been a lot of investment uncertainty in 2018 with large market fluctuations causing investors to question how to manage and grow their finances. Well, Gareth Henry is an expert in private credit and hedge funds and recommends investing in Private Equity for those who are the right fit.
Private Equity investing is not for the swing trader per Gareth Henry. While PE (Private Equity) can be a source of outsized returns, it means committing to a long term investment that will be more than weeks or months; the opposite of a swing trader.
Private Equity firms typically invest in privately held companies but will also consider publicly held ones for buy outs and liquidation. Privately held companies, which can be established or start-ups, are preferred since the capital is not listed on the public exchange. This allows a PE to invest directly into a company. Gareth Henry states that the capital liquidated in the private company can be re-invested into new technology, expand working capital or make new acquisitions.
According to Gareth Henry, the disadvantage of a publicly owner company is the cost to complete the IPO process. Not just the financial cost, but the time it takes to meet or maintain public ownership standards for small to mid sized companies.
Since PE investing brings high risk with high return opportunity, it is Accredited Investors who take the risk. Accredited investors earned at least $200,000 ($300,000 for couples) over the last two years and can handle securities not registered with the Security & Exchanges commission or other regulators.
As a comparison, PE firms shared an annualized return of 16% over a ten year period versus 9.1% with the Russell 2000 Index or 7.4% with the S&P 500. So, for the Accredited Investor who has time and patience for long term investments, Private Equity should be a consideration.
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