Investment & Investing

The source of capital that has flowed into private equity has increasingly come from low risk investment vehicles that are divesting due to the collapse of interest rates. This has exposed pensions, retirement funds, mutuals etc. So yeah, schadenfreude might be a bit callous.

The pro argument is that PE can invest faster and more enthusiastically and drive gains through being nimble, cutting costs and achieving profitability in verticals that traditional investments can't penetrate i.e. direct-to- consumer retail, emerging tech and often a weird mix of the two.

My personal experience of PE is that they haven't got a fucking clue how to affect change and they spend the majority of their time trying to work out what other PE firms are doing, and investing in so they can copy them. They are all run by old boy Oxbridge chaps who have very limited experience in managing successful businesses themselves so tend to run a one-size-fits-all playbook.

The stench of their failings is so potent I'm convinced it's going to come crashing down at some point. solid chance I'm wrong though and PE will continue to be a slippery profit-making beastie.

Interesting FT article - from April 2019.

It's possible that the response to COVID has pushed back the (possibly) impending doom, with the result that it looks even more inevitable than it did 18 months ago.

This is a very broad topic and I do not have the time to pull specific data but let me throw out a few rough stats and thoughts.

Historically only around 10% of PE exits are IPOs and if anything that number has been shrinking for a while. IPOs take a long time and typically involve a lock-up period for shares, better to sell to a strategic buyer, e.g. sell your juice business to Cola. PE investors are skeptical of PE to PE sales but the argument is a small UK focused manager may build up a national business that can be taken global by a regional/global PE manager.

Not sure where that 50% to Google/Facebook number is coming from or what it is based on. If it is advertising revenue, it seems like just another way of saying that Google/Facebook dominate the online ad market. How is this different for public companies?

If you are in the industry it is fairly easy to identify the largest PE investors. Any member of the public can look at IPE.com for example, which will take longer because you have to scrape data together yourself. A lot of capital is coming from pensions schemes.

PE spans the entire spectrum from tiny companies to very large companies.

Liquidity crisis is an odd idea for PE funds. By definition PE is private, i.e. not listed and liquid, so investors are going in with their eyes open and large institutions typically allocate to PE accordingly. It can be an issue if you have illiquid assets in a fund that promises liquidity, Woodford and some UK real estate funds being prominent examples. The vast majority of PE funds are set up with a 10+ year fund life to avoid being forced to sell. PE funds and their investors can still get themselves into trouble but I think it is case specific rather than systematic.

For context, the entire PE industry is $3trillion somewhere around 2-3% of the global economy. Number varies depending on what type of PE you include. Apple's market cap is $2 trillion. PE funds are set up as independent structures, there is a lot of variance in what they invest and their investor base. It is difficult to see why a US fund investing in US business with mostly US investors should be impacted in the same way as a EU fund investing in the EU with mostly EU investors (home bias is not unusual), unless it is a global economic crash but that would hardly be limited to PE alone.

On the Monzo example, that is venture capital for you. A VC fund can still be a success if 2 out of 30 companies are massive successes. In a way the idea is to try lots of things and hope something works.

A certain large fund gathering lots of publicity is to PE what Foffa is to LFGSS.

If you look at coverage of PE on IPE and other investment industry publications, you will find a lot of questions around PE performance, how it is measured and how PE will perform given the increased competition.

Possibly. However, Covid has meant that lots of extra cash has been flowing into failing businesses through things like CBILs and the furlough scheme. This might stem the tide a while longer.

The big thing is that there is a lot of money invested in businesses with no exit plan or route to profitability so it's coming at some point.

All good points. Good to have diff opinions.

Liking the foffa analogy.

https://www.cityam.com/the-ftse-100-is-lagging-behind-soaring-global-markets-but-why/

FTSE 100 heavily exposed to banking It is “an index that has become a
victim of its own composition,” says Chris Beauchamp, chief market
analyst at trading platform IG.

At the end of 2019, financials was the biggest sector in the FTSE 100
at 20.3 per cent, according to data from Sibils Research. Consumer
staples came in second but energy was not far behind at 14.4 per cent.

Forgive me for not looking through this extensive thread for the answer but...
Looking to invest a five figure sum in a 5 year fixed rate bond or similar (Ie: low risk). I am fed up of searching online and not being able to establish if info is current.
Any suggestions where to look?

have you looked at comparison sites? https://moneyfacts.co.uk/savings-accounts/fixed-rate-bonds/

Yes but are they as neutral & inclusive as they should be?

Martin Lewis is pretty good.
https://www.moneysavingexpert.com/site/moneysavingexpert-finance/

Looks impartial to me. And up to date. Not sure what you meant by inclusive though.

By inclusive I mean do they search far and wide?

I just sold up out of my Vanguard isa today.

I made 10% in 4 months and as buying a house figured it was a good time to check out

Great stuff...very good return and good time to sell. Markets are looking very risky given potential second wave and brexit. Also good time for property given the stamp duty cut.
Well done.

Lol I was thinking this today when I looked at my ftse 100 tracker vs a global all shares tracker. FTSE has been under performing for about 5 years.

I dunno why I ever invested in a UK tracker tbh, wouldn't do it again and don't think it's actually recommended that you ever buy shares in the company you live and work, especially if you have property there too.

Risk. My understanding is, buying "local" means that if the UK was to experience massive growth relative to the wider market, your buying power wouldn't be reduced (because you'd be benefiting). If the UK wasn't to experience growth relative to the wider market (i.e. what we are seeing now) then yes, you wouldn't be seeing optimal returns, but you wouldn't feel it day-to-day because living costs aren't rising. This is particularly pertinent for those who's investments are (or are soon to be) a source of income.

The UK market has underperformed because its weighed heavily on financial and oil, both doing badly, right now.
Investing local is not a bad thing because it negates the currency risk.
Us indices have done well due to large high tech stocks doing well and banksthat have been better supported by there government and largely recovered from credit crunch.

Has anyone pulled out of their LISA? I now live overseas and in a years time i'll need to buy a property here where the cash would really help.

Since the interest rates dropped and the UK government changed the penalty to 20% (essentially just paying back the government bonus) I have been thinking maybe this is the opportunity to get the equity out of it, put it in another UK account for a while until there's a better exchange rate and then move it over.

I'm not sure it works like that. I think there is two distinct 20% values. 20% penalty is on the amount you have put in.

20% government contributes is awarded at time of use (for house or withdrawing at 65 or whenever it is) no?

Copied from ajbell website

You can withdraw money from your Lifetime ISA (LISA) at any time. But you'll pay a government withdrawal charge of 20% (25% from 6 April 2021) unless you withdraw it under certain circumstances:

When using the money to fund the purchase of your first home. The home needs to be worth £450,000 or less, and be bought with a mortgage
When you’re age 60 or over. This means you can also use your LISA to save for retirement
If you’re terminally ill
If you withdraw cash from your LISA for any other reason, you’ll have to pay the government withdrawal charge of 20% (25% from 6 April 2021) – which could mean you get out less than you put in. If you’re willing to pay this withdrawal charge to withdraw money from your Lifetime ISA, just log in to your account and select 'Withdrawals'.

If you’d like to use your Lifetime ISA to buy your first home, you’ll need to contact your solicitor or conveyancer directly, who’ll ask you to complete a declaration. They’ll then complete their own declaration, and send it to us.

The government bonus is awarded annually with my Skipton LISA, (at 25%) so i've been getting 1k added to the 4k i'd put in per year.

As far as i can tell by the example, the penalty is on that total value.

At my calculations i'd lose 44gbp of the interest i'd previously earned on the amount i have in it (which I am not really worried about).

Example from Skipton LISA withdrawal page:

1 Attachment

Firstly I thought government contribution was 20% not 25% and second confusion (entirely on my part) I think was between this and the help to buy isa. I'm fairly certain the government top up bonus bit was awarded at the point of utilising the funds e.g. buying a house.

This might actually award the bonus per year

That's right yeah - we switched from Help to buy ISA's to LISA's a few years ago for that reason.

Any thoughts on which currency would have the most stability in a No Deal, post-US election, 2021?

Stability, or growth? BRIC currencies for the latter.