8 months ago • 2 mins
High-net-worth individuals and institutions have been able to keep private equity investment opportunities to themselves for, well, ever – but you might be able to pry them from their fingers, especially if you live in the UK. A new type of open-ended fund – long-term asset funds (LTAFs) – can now grant you access to private market investments like small startup fintech and life science companies, renewable energy infrastructure, farmland, and even private debt.
You’re probably used to exploring alternative assets like commodities, wine, art, and real estate in a bid to uncover higher returns and portfolio diversification. But check out the chart above, and you’ll see why private equity might deserve its hype: it’s significantly outperformed stocks with both a large and small market capitalization. And sure, you’d need a lot of money to invest directly into these private equity assets, but you can buy in quickly and for a lot less with LTAFs. That way, you’ll not only have a wider variety of assets – including non-listed companies – you can invest in, but you can also expect higher potential returns and better diversification.
As with any investment, though, there are risks. For one, private equity investments tend to have lower liquidity, which means you might not be able to get your cash out immediately if you want to. That’ll depend on the type of assets the LTAF holds: only one – recently approved in the UK – has a three-month notice period for redemptions. And for another, LTAFs wouldn’t necessarily be the right move if you’re looking to make a quick buck. These assets suit individuals with a longer investment horizon so they’re a better fit for your pension portfolio.
If you don’t find any funds you like the look of, remember that LTAFs are a very new concept – just like exchange-traded funds were barely 30 years ago. But demand for private investments is only going in one direction, so it shouldn’t be too long before you’re flooded with options.
Disclaimer: These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment advisor.
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