A world where animal spirits are running wild is also one that has temporarily divorced from fundamentals. Experience tells us this often doesn’t end well.Â
The wealth transfer from Baby Boomers to their offspring, which is in full swing, has got the taxman’s full attention, especially as it pertains to capital gains payments, trust structures and potential breaches of the Tax Act’s Division 7A.
Passive private equities strategies: it’s no joke
Tim Hodgson, a co-founder of the Willis Towers Watson-sponsored ‘Thinking Ahead Group’, in 2002, has an interesting theory. He says people laugh at him about it, but, then, “people also laughed at Jack Bogle”, the late founder of Vanguard and the earliest and biggest proponent of index investing.
Speaking in Sydney last week (March 10 – see separate reports this edition) Hodgson said that “at some stage” passive private equity strategies would emerge for investors to utilise. “Maybe in my lifetime, but certainly in some of yours,” he said. “I don’t know.”
He was speaking at the Willis Towers Watson ‘Thinking Ahead Group’ annual event, which includes that of the related ‘Thinking Ahead Institute’, a broader organisation of big pension funds and some of their managers, which he founded in 2015.
“There will be a platform to buy and hold private company investments,” he said. “I have a lot of confidence in us getting to that point,” he said. Jack Bogle would have loved to hear that sentiment.
There are, in fact, a handful of private equity investment ‘platforms’ in the world, offering some liquidity for smaller investors, but they tend not to offer the same characteristics of traditional private equity management. They pay a big price for offering their greater liquidity, for starters.
The PE sector uses the unusual jargon of ‘limited partners’ (client super funds and family offices) and ‘general partners’ (funds managers). Big fiduciary funds find the jargon annoying.
– G.B.
