A recent Forbes article dated December 1, 2014 stated, “while the affluent population has always invested in privately held firms, interest in private equity as an asset class has surged in recent years prompting a commensurate response from the financial community. The range of opportunities available today to private investors is growing and includes from direct investments, funds, angel groups and everything in between. Younger generations are curious about private deals too. In a recent study of ultra-wealthy inheritors, those who expect to inherit US$100 million or more, 22 percent of the inheritors are already doing deals and 65 percent plan to become more involved in buying and selling substantial assets.”
For many years, major endowments like Yale have enjoyed the outsized returns that only private equity can offer.
In a recent September 24, 2014 update from Yale’s endowment, the university’s 31% allocation to private equity exceeds the allocation to any other asset class with absolute return at a 20% allocation and foreign equity at 13%. Over the past 10 years, private equity investments have averaged an impressive 15.4% annualized return for Yale, which outperformed other strategies by a wide margin.
Under the stewardship of David Swensen, Yale’s endowment has grown from $3.5B to $23.9B over the last 20 years. Yale’s private equity assets concentrate on partnerships with ﬁrms that emphasize a value-added approach to investing.
Given these trends, it’s not surprising that many financial advisors want to expand their platform of capabilities to include private equity. However, the problem advisors and individual investors have faced until now is access to true private equity. Traditional funds structures are not feasible for individual investors as they are limited to Accredited Investors (no more than 100) and Qualified Purchasers (no more than 499).
One company that has responded to this increased investor demand is Triton Pacific Investment Corporation (TPIC), a public non-traded Business Development Company (BDC) delivering direct access to private equity transactions in addition to targeting consistent yield through investments in secured debt transactions.
“Our model is a hybrid BDC, allowing our sub-adviser ZAIS Group, LLC ($5.2 billion AUM) to identify senior secured debt transactions while we focus on direct investments in private equity,” says Craig Faggen, Chairman and CEO of TPIC.
As a result, TPIC is the only BDC product truly focused on growth and income. With low minimums, dividend reinvestment, and full transparency within a public offering, individual investors can now invest in the same alpha generating asset class that the world’s largest and smartest individual investors like Yale have enjoyed access to for decades.
Many financial advisors are being forced to examine their offerings and expand them accordingly as their clients are looking for different types of alternative investments that offer low correlated returns, access to cutting-edge thinking, and serious growth potential.