10 Most Popular Private Investment Strategies For 2017
Summary
- We recently undertook a survey to determine the private investment strategies most likely to attract allocations over the next 12-months.
- Here are the results and our commentary.
- The response to our survey was overwhelming and it took me some time to collate.
10 Most Popular Private Investment Strategies for 2017
We recently undertook a survey to determine the private investment strategies most likely to attract allocations over the next 12-months.
Here are the results and our commentary.
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The response to our survey was overwhelming and it took me some time to collate.
While I'm no statistician it is worth mentioning the methodology I employed.
The survey went out to over 100 allocators of capital including institutional investors, family offices, wealth managers and high-net worth individuals with a 45% response rate.
The responses were split approximately 20%/30%/30%/20% according to the above investor types respectively.
Most respondents provided multiple answers to the question - "Which strategy are you most likely to allocate to over the next 12 months?"
In order to compile the results below I added up all the answers and calculated the percentage by strategy.
It seems I captured most of the pertinent strategies in the options provided but 4 additional investment strategies were furnished under the 'other' option.
The Results … Drumroll
Strategy | Percent |
Private Debt - Short Duration Loans | 21% |
Real Estate - Multi Family | 20% |
Natural Resources - Gold and / or Energy | 14% |
Distressed Debt | 11% |
Long Vol Quantitative OR Equity Market Neutral | 9% |
India | 8% |
Mid Mkt Buyout / Growth Equity | 5% |
Mezzanine Debt | 4% |
Real Estate Commercial / Healthcare | 2% |
Intellectual Property | 2% |
VC Tech (Early and Late Stage) | 2% |
TOTAL | 98% |
It may come as little to no surprise that we are all clamoring for yield compliments of the Federal Reserve and ultra-low interest rate environment.
In 1st place with 21% of the votes is Private Debt - Short Duration Loans;
Closely followed in 2nd place by Real Estate - Multi Family Properties with 20% of the votes.
It seems as if hardly any of us are hunting elephant returns which admittedly is more a representation of the clients we serve i.e. pools of capital focused primarily on capital preservation and a real rate of return.
Quite a distance behind, in 3rd place, with 14% of the votes is Natural resources - Gold and/or Energy. Two reasons potentially stand out for this.
1 - Gold & Silver has been on a tear lately and are exhibiting a negative correlation to equities - a hedge;
2 - Most of us are value based investors and recognize a bargain when we see one.
In fact I would postulate that most of us are quite defensively positioned in our portfolios because the next 2 favored investments strategies were:
- Distressed Debt - 11% and;
- Long Volatility Quantitative OR Equity Market Neutral strategies 9%
Interestingly the lower end of the voting table all contained what I would characterize as 'risk on' strategies focused mostly on capital appreciation with some income component:
- India (and other EM) 8%;
- Private Equity / Growth and buyout 5%;
- Mezzanine Debt 4%;
- Intellectual Property Rights 2%;
- Venture Capital (early and late stage) - only 2% - this was a surprise considering how hot this space has been until recently;
- And finally other Real Estate including office, industrial, healthcare - 2%
- Nobody included Legalized Cannabis as an option
For the auditors amongst us that adds up to 98%. The difference I would ascribe to rounding or a margin of error in the poll rates … which we know is meaningless unless this was a Brexit vote!
Where to from here?
Firstly - we did not consider the optimal investment vehicle choices. Most respondents I am guessing are consumers of private placement limited partnership structures although more than a few would use separate accounts or require a regulated vehicle such as mutual fund or ETF.
And of course not everyone would use a fund … many respondents prefer a direct or co-investment approach. [Our preference is for a mix].
Secondly - We did not consider the characteristics we would look for in a potential investment manager in those respective strategies. Our preference for managers broadly is:
- Boutique Managers;
- Historical record of adding value (200 - 300 bps per year above some benchmark);
- Deep understand of and ability to communicate the Risk of the investment and business model;
- Considerable investment by the partners of the manager.
We think both points have merits and are worthy of further research on their own.
Thank you to all who participated I found the results interesting and informative and I hope you do too.
This article was written by
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.