Originally published on LinkedIn on May 9, 2024
Okay, people. Are you getting as confused as I am by all the “private markets punditry” over the last month or so?
Let me see if I can keep this all straight…
On the one hand, we’ve got firms with a clear agenda and vested interest in pushing their products on your clients. They’re out here putting on a full-court press with their media and industry partners (no doubt blowing out their PR and Sponsored Content budgets in the process)—pushing their ‘evergreen’ PE funds on individual investors, spinning up Private Credit funds so they can lend your client’s capital back to their private equity funds (“NAV financing”), or promoting dubious research results as ‘facts’ about long-term PE returns on an absolute and relative basis.
On the other hand, there’s a drought of distributions to LPs (aka your clients) because deal activity is at a six-year low, while at the same time, dry powder has piled up to record levels.
On a magical third hand, we’ve got reporters and researchers—who we imagine generally have pure intentions—shining a light on various issues related to “private markets,” including jokes about how PE’s new ‘evergreen’ push is simply a ‘buy & hold’ strategy, or how the oft-marketed ‘illiquidity premium’ might not really be a thing anymore, or even how private credit (as an asset class) seems to be only making money for GPs.
In an effort to confuse this further, because you know, I can’t resist when I’m on a roll—there are even calls coming from ‘inside the house’! Taking the Private Out of Private Equity? Hmmm.
You still with me? Seriously, there’s a fourth hand.
Yes, and on this fourth hand is a real tricky one. According to one publication, UHNW investors are apparently shunning hedge funds because they can no longer “deliver exciting returns.” At the same time, hedge fund assets are hitting record highs, a number of hedge fund strategies are putting up their best quarters since the pandemic, and the largest firms are reporting record profits.
And this, in any case, is all beside the point because if, as the UHNW-focused article implies, “index funds” and private equity are an acceptable substitute for uncorrelated hedge fund allocations as far as UHNW investors are concerned—you are doing alternatives wrong. This only further highlights that experienced wealth management is necessary whether you’ve got five or ten digits in your net worth; particularly when it comes to alternative investments.
“Dan, is there an overarching point to this entire thing?” you ask, your head spinning.
My point is that it’s becoming increasingly difficult to understand who’s on first and what’s on second, never mind who’s on third when it comes to ‘private markets’ investing. There’s a lot of noise, and I don’t blame you for not knowing who to trust. Everyone’s pining for a piece of your client’s wealth, but very few of them seem to be truly aligned and focused on your clients’ needs, as far as I can tell.
I assume you’re like most people; you only have two hands—and yours are both on the wheel, steering your clients towards their financial destination. What I’m offering is a little help navigating the alternative investment side of things. It is what we do best at Third Wire—and yes, this is also a shameless plug.
Reach out if you’d like an extra hand.
Or maybe you’d just like to track Third Wire’s performance. Sign up for our monthly performance updates here!
Best,
Dan
Disclaimer: This newsletter contains the personal opinions of our CEO and is intended for informational purposes only. It is not designed to be a comprehensive analysis of investment opportunities or strategies. Financial advisors should consider the views expressed here as part of a broader analysis and should perform their own due diligence when advising clients on investment decisions. This communication may include forward-looking statements that are subject to risks and uncertainties, and actual results could differ materially. Past performance is not indicative of future results. References to specific securities, asset classes, or financial products are for illustrative purposes only and are not intended as recommendations or endorsements.
