TLDR:
– Roxanne Davies, CEO of Proprietary Capital Holdings (PCH), a Singapore-based family office, avoids private equity and venture capital funds.
– Davies believes that if you can’t access top private equity or VC funds, it’s better to invest in listed stocks.
In a recent interview with AsianInvestor, Roxanne Davies, the CEO of Proprietary Capital Holdings (PCH), a Singapore-based family office, shared her insights on why the firm avoids investing in private equity and venture capital funds. Despite the allure of these alternative asset classes, Davies believes that unless investors have access to top-performing funds, they may be better off investing in listed stocks instead.
Davies expressed her wariness of private equity and VC funds, citing concerns over the terms for limited partners (LPs), such as additional charges that benefit the general partners (GPs), nonsensical valuations, and constant fundraising rather than a focus on portfolio performance. She also highlighted the lack of compelling distributions to paid-in capital (DPIs) in private equity funds, especially in comparison to liquid markets.
Another key factor influencing PCH’s decision to avoid private equity and VC funds is the quantum of allocation required to be successful in these investments. Davies emphasized the importance of putting a constant flow of capital into these funds and building deep relationships with fund managers. Without these factors in place, investors may not be able to access the top-performing funds and may end up in lower-performing groups.
Recent data shows a decline in private equity deal exits and fundraising, leading to lower payouts for investors. Davies believes that performance is crucial in the current investment landscape, with larger institutional investors having a competitive advantage due to their deeper relationships with fund managers. Smaller investors can improve their access to preferred PE funds by developing relationships with fund managers and considering alternative access channels like tokenisation.
Overall, Davies advises caution when investing in private equity and VC funds, emphasizing the need for deep relationships with fund managers and a clear understanding of the risks involved. By staying selective and strategic in their investment approach, investors can navigate the complex private markets landscape effectively.
