I don't know if individual investors trying to get in on private equity now will end up being played for suckers. I do feel certain that getting in LAST YEAR -- as with 3i Group (III/LN) -- will prove to have been more advantageous.
The Lex Column in the Financial Times reminds me of this with its piece on KKR listing a private equity vehicle in Amsterdam. The editors caution:
Investors should be wary, however, when alternative investments get packaged up and sold to the masses. Look at the recent proliferation of commodity-tracking products. Certainly, average private equity returns are under pressure.
That said, investors have been able to buy shares in the likes of 3i and SVG Capital for years. The $1.5bn targeted by KKR PEI should be set in context: it is one-tenth of the total expected to be raised by KKR’s latest global fund. From an industry perspective, though, cashing in on its big brands and tapping a bigger pool will be hard to resist.
Two points here. First, the more you see IPOs offering individual investors ways to "get in" on private equity, the more you know it's late in the game (or even that the game is really over).
Second, and most importantly, we shouldn't buy any listed security simply because it's a way to participate in private equity. I bought 3i Group last year because I viewed it as undervalued. Period. I liked the fact that it's involved in private equity (as well as investments and venture capital), but that would have meant nothing if it were fully valued at the time.
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