Below is a brief excerpt and the Chart of the Day from today's Early Look note written by David Salem.
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Looking backward but not necessarily forward, the surest means of profiting bigly from Private Investments (PIs) has been to invest not in long-lived and inherently illiquid PI funds but rather in marketable stocks of PI fund managers. Don’t believe it? See the Chart of the Day below, documenting the generally plump margins by which shares of such firms have outperformed the public market equivalent, as measured by the S&P 500 Index. Crucially, the margins just referenced generally exceed the 5% “illiquidity premium” that institutional LPs customarily target when committing capital to PI funds. Talk about having one’s cake and eating it too: premium returns with essentially no forfeiture of liquidity. |
