The answer to ‘When is the best time to invest?’ is near always ‘now’. After all, to maximise payout, especially in private equity, time is an investor’s biggest asset. Despite uncertain economic times, private equity investing is expected to show positive growth over the next decade.
“The greatest money-making asset anyone can possess is time.” – US financial expert Ed Slott
Although by no means a rule, long-term investment opportunities are historically known to outperform their short-term counterparts. This is true for several reasons, among them resisting emotional trading decisions before reaching a predetermined date. However, patience, dedication to portfolio strategy adherence and a willingness to take on higher risks are required.
With the right financial advisor by their side, investors with such traits are likely to see their investments come to fruition.
Even when considering rising inflation and a looming global recession, long-term, alternative investments such as the Cornerstone Capital Private Equity Fund remain a solid choice for those bold enough to take the chance. After all, market volatility, as well as the global and local economy, often have a greater impact on traditional short-term assets.
That being said, portfolio diversification is essential to experiencing healthy, long-term growth.
Private equity boasts resilience during tough times
Private equity is an excellent alternative to traditional long-term assets such as stocks due to its resilience. Since private equity investments are typically made in unlisted companies, they are less susceptible to market volatility than public companies.
Other than that, private equity asset managers such as IFSA play an active role in the management of their portfolio companies, which gives investors an inside representative. The firm acts in investors’ best interests when the time comes for impactful business decisions. This is partially responsible for the asset’s adaptability, allowing it to increase in value despite economic volatility.
Private equity Asset Managers’ flexible approach to investment strategies also plays a vital role in the asset’s success. When market conditions change, so can the original plan. Firms proceed to reassess the situation and refocus the asset on more resilient horizons, as necessary.
Whether a private investor or independent financial advisor – working with a reputable private equity asset manager has clear benefits. Their expertise and unique perspectives see portfolio companies grow faster, advance their capabilities and overcome previously insurmountable challenges.
Past results as indicators of future trends
Emotional trading is a natural reaction when anticipating major economic events like a recession. During this kind of event, private equity’s illiquid nature is often considered disadvantageous. However, those in the know realise it prevents panic-selling, which typically nets more significant losses, and shields investors from market volatility.
When looking at past events, private equity investors have little to fear. The asset class is able to come out on the other side comparatively unscathed. It often even sees some of the best returns after disruptive economic events.
During the dot-com bubble, the US buyout market lost less than 13% of its value, while the European market only lost slightly above 7%. When compared to the S&P 500’s 40% decline, this was only a moderate drop.
The private, independent and employee-owned US investment management firm Neuberger Berman assessed private equity return patterns in three recent downturns: the early 2000s, the global financial crisis (2007-2009) and 2020 COVID-related market events. They found that private equity consistently experienced a less significant drawdown and made a quicker recovery than public assets in all three cases.
Private equity: A worthwhile avenue to growing wealth
Private equity can be a beneficial and stabilising addition to a diversified investment portfolio. Although, this greatly depends on the firm or fund manager’s experience and skills.
It’s crucial to select a firm or manager with a proven track record of actively managing portfolio companies to minimise risk. These professionals understand the importance of anticipating change, implementing effective governance strategies, and investing in business growth. Additionally, their extensive resources can prove advantageous when facing challenges such as economic downturns.
While private equity can be a lucrative addition to a diversified investment portfolio, it’s essential to partner with the right firm or fund manager to increase the odds of success. This is why IFSA serves on the board of directors of every enterprise we invest in. We realise it gives us a far greater ability to shape outcomes, resulting in increased security and less volatility.
The time to start increasing portfolio value is now
With over sixty years of combined experience growing wealth for IFAs, private investors, and SMMEs, the core IFSA team is well-versed in alternative investment markets, including private equity.
The proof is in the proverbial pudding. We invite both IFAs and private investors to delve into our fact sheets, giving special attention to inception dates and historical performance. You know your clients’ or your situation, and we have the insights to develop distinct portfolios to achieve the best possible long-term results.
Reach out for more information or to schedule a free consultation. Start your private equity journey today.
IFSA (Pty) Ltd Registration No. 2000/005153/07 An Authorised Financial Services Provider Licence No. 43337