Contributor Since 2016
Sameer Jain is Managing Partner and co-founder at fintech ActiveAllocator.com, the world’s first portal that seamlessly integrates traditional, illiquid and alternative investments within portfolios. Prior to this he was Strategic Advisor to AR Capital, Chief Economist & Managing Director at AR Capital and RCS Capital (NYSE: RCAP). Prior, he headed Investment Content & Strategy at UBS Alternative Investments, where he was also responsible for all illiquid investing across the platform. Before UBS he was at Citi Alternative Investments, Cambridge Alternative Investments and SunGard System Access. He has written academic and practitioner articles on alternative investments, many of which are available in the public domain at SSRN. Mr. Jain is a graduate of Massachusetts Institute of Technology and Harvard University. He has received the Alfred Sloan Fellowship and also was a Fellow of Public Policy and Management at the Harvard Kennedy School of Government.
These are negotiated investments in privately held companies at different stages of maturity undertaken with the objective of improving their profitability and growth prospects and then reselling them at a higher price in the future. Private equity fund managers often have increased access to information regarding their investments, while traditional money managers must rely on publicly-available information, because they only invest in the public markets. Also, private equity managers often invest based on a negotiated price, while traditional money managers typically pay market prices. They often create value and are able to exit acquisitions at higher multiples thus creating a profit for their investors.
Private equity is an extremely heterogeneous asset class with many sub-sectors. These sub-sectors, some of which we discuss below, have very different asset characteristics. This means that each subsector has different performance drivers, which investors need to understand to make informed decisions.
Private equity can be a source of attractive returns over the long term. Moreover, private equity returns do not correlate closely with returns from traditional asset classes - properly implemented, the introduction of private equity can improve portfolio diversification.. They have the potential to provide access to selected growth opportunities even in low macroeconomic growth environments for successful private equity managers are focused on picking companies with growth potential and actively creating conditions for growth, which investors can monetize. They are however long-term oriented illiquid investments. Interests in private equity funds are generally not readily marketable, transferable or redeemable. They have uncertain cash flows with respect to both capital calls and distributions. Also, they are a form of blind pool investing, since investors do not know beforehand what their funds will be invested in and must rely on the skills and judgment of the private equity manager. Private equity is heterogeneous and includes several sub-sectors, all of which have their own unique characteristics. Given large dispersion of returns across managers and a degree of performance persistence, manager selection is of critical importance.
Please continue to check back in the coming weeks as I will be diving deeper into durable income-producing alternative investments.