Tag Archives: ELTIFs

Private Equity Mini series (4) : “Investing like a “billionaire” for retail investors in the UK stock market via PE Trusts

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Private Equity Mini series (4) : “Investing like a “billionaire” for retail investors in the UK stock market via PE Trusts

This is the 4th part of my Private Equity “mini” series. The previous posts can be found here:

Private Equity Mini Series (1): My IRR is not your Performance
Private Equity Mini series (2) – What kind of “Alpha” can you expect from Private Equity as a Retail Investor compared to public stocks ?
Private Equity Mini Series (3): Listed Private Asset Managers (KKR, Apollo & Co)

Background:

Not sure if this is mainly a German phenomenon, but you can’t listen to a German finance podcast without being quite aggressively advertised on how Private Equity is finally being democratized through some “revolutionary” retail offerings that almost always are quite complicated and contain another layer of fees on top of what the PE guys are charging.

The main pitch is that now even the small guy on the street can do what previously only billionaires could do: Invest into Private Equity and make boat loads of money.

The hard truth is that Private Equity has been democratized long ago in the UK but no one gives a sh** about it.

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Private Equity Mini series (2) – What kind of “Alpha” can you expect from Private Equity as a Retail Investor compared to public stocks ?

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Management summary:

In this post I wanted to dig a little deeper on why I think that many currently offered Retail Private Equity offerings (e.g. ELTIFS) will most likely underperform public equity markets going forward. Despite some structural advantages of Private Equity as such, the double layer of fees and costs will be a huge drag on performance. On top of that, historic tailwinds for the PE industry (low interest rates and low purchase multiples) have most likely disappeared.

Introduction:

After the first installment of this mini series, where I tried to explain why stated PE IRRs should not be confused with actual performance, I wanted to briefly touch another important point in order to understand this “asset class” better:

Many Private Equity players claim that both, past returns and future returns of Private equity will be significantly better than comparable indices of listed equity. 

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