Running a private equity fund is a bit like being a saint in waiting. No one quite understands the good you do. Or so those running the UK’s listed investment trusts sometimes seem to think. At a panel discussion in Edinburgh last month that focused on the sector’s troubles, it turned out that they see the main problem as one of education — not inflated valuations, not the sharp rise in the interest rates and most certainly not the model.
It’s just that investors can’t see that this is a “great retail product” and a “great wealth product” – and as a result aren’t buying enough of it. They don’t get that management is easier in private equity (majority shares make for easier decisions), that all the growth is in private companies (no one lists any more) and that illiquidity should come with a premium (managers can take long-term decisions). They should – and then they should shift 5% to 10% of their portfolio into private equity. Pronto. Those who haven’t yet done so or are going to need a little more education — at least enough to help them ignore anyone talking “a bit dirty” about the product, as one manager put it — should be diving right in. Education, education, education. I paraphrase, but you get the idea.