Private Market Investments You May Not Know About…But Should
Private market investments, less conspicuous than their public counterpart, offer a trove of opportunities for the savvy investor. While the daily headlines gravitate towards stocks, bonds, and the ebbs and flows of the global exchanges, private markets usually operate silently in the background. They encompass a range of unique investment avenues, each with its distinct set of benefits and risks, from private equity to asset-backed securities and insurance-linked assets.
These private markets have continually drawn the attention of sophisticated investors worldwide. Their allure lies in the promise of diversified returns, a degree of insulation from broader market volatilities, and access to innovative ventures not available in the public domain.
Many investors are recognizing the importance of looking beyond traditional avenues, seeking stability and growth in alternative spaces. However, unlocking the full potential of private markets demands more than just capital. It requires in depth knowledge, a well defined risk appetite, and a keen eye for opportunities.
For those willing to venture into this space, the rewards can be substantial, offering both financial gains and unique portfolio diversification.
The Resurgence of Private Equity Secondaries
Once a small segment of investment options, private equity (PE) secondaries have come to the fore, presenting incredible opportunities. Investors not initially part of PE transactions, owing to PE’s inherent illiquidity, are often a good fit for secondaries. These avenues grant them access to notable PE deals even after the initial investment phase.
A Private Equity secondary is a transaction where an existing investor in a private equity fund sells their stake or interest to another party, the secondary buyer. This process allows the original investor to exit their position before the fund’s term ends, providing liquidity in an otherwise illiquid investment.
The buyer then gains access to investments that would otherwise no longer be available in primary markets. It’s a mechanism that brings flexibility to the rigid structure of traditional private equity, addressing liquidity concerns while opening up new investment avenues.
July was noteworthy for PE secondaries. For example, the Technology, Media & Telecommunications (TMT) sector witnessed 35% of total capital investments. Bain Capital’s acquisition offer for Chindata Group stood out, highlighting this market’s potential. Valuing Chindata at close to $3 billion, this move facilitated lucrative exits for many PE investors.
Asset-backed Securities: A Potential Turnaround Story:
Asset-backed securities (ABS) are financial instruments directly tied to tangible assets, primarily those with a predictable cash flow, such as debts or routine payments. These securities have been a reliable staple for many portfolios, offering a balance between risk and return. However, recent shifts in economic conditions, particularly the uptick in interest rates, have led to a dip in the value of ABS.
Yet, every cloud has a silver lining. This drop in value is now presenting an opportunity. With the current economic indicators suggesting that inflationary pressures are waning, there’s ample reason to believe that ABS investments could regain their previous luster and provide promising returns in the coming months.
Insurance-linked Assets: The Unshakable Pillar
Insurance-linked securities (ILS) encapsulate a unique proposition as an investment option. Their value is tethered to insurance loss events related to individual lives or tangible assets. This characteristic sets them apart from market-linked instruments.
ILS funds shine with their uncorrelation to the overarching financial market, emerging as an asset class that can stabilize portfolios amid market unpredictability. They offer resilience in turbulent economic times by acting as volatility mitigators.
Unveiling the Uncharted
Private market assets are brimming with potential, but choosing the right funds is essential. This is where FundKernel shines. Utilizing our advanced D3M Product Curation Engine, we ensure clear and unbiased evaluations of a vast universe of private market funds for investors. If you are ready to dive into the private market confidently with FundKernel by your side, reach out to us for more information. Start your investment journey with us today.
Vishal Bhasin is responsible for investor relations for FundKernel Limited and the Director at Rostrum Grand Limited. Vishal has over 17 years of experience in business development across B2B as well as B2C segment, Asset Management, investment advisory, and Fintech. Proficient at building strong relationships with the partners and customers.