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Follower ○○

Low-Fee Private Equity / Alternative Investment Approach

I’m looking for the best way to invest in alternative investments (i.e. private equity, real estate, etc.). Details: 

I recently sold my software business and have mid single digits of millions of dollars of after-tax proceeds to invest. I am a believer in passive, low-fee investing, so I put ⅔ of my proceeds in Betterment to have the majority in liquid, public assets. 

My business was financed by private equity firms, so I have direct exposure to how PE outperforms public markets by a large margin. The Economist just mentioned that PE outperformed public by on average over 6% per year between 1997 and 2006 (this is a big sub-topic that I don’t intend to fully get into here; for more info see here and here among others). 

While I had some opportunities to invest directly in the funds of my investors, given the high minimums I did not think that was an intelligent, well diversified approach. I then met a number of registered investment advisors (RIAs) from both independent and big firms. They all wanted to charge huge fees (1% or greater) for services I don’t need. I just wanted access to good, diversified PE portfolios. I asked if I could even pay their fees on my PE investments but do my public investments through Betterment. They refused saying they needed to manage everything (and charge fees on everything). 

I looked into a lot of the new online alternative investment offerings: YieldStreet, Cadre, Fundrise, etc. With all of them I could not get a real grasp on just what I was investing in, what the full fee structure was, etc. And ultimately I want to trust known managers with proven track records (i.e. Blackstone, KKR, TPG, etc.) with wide diversification rather than put significant capital at risk with relative unknowns. 

So does anyone know of a good, low fee (i.e. <= 50 bps) way for accredited investors who are not super-wealthy to invest in top-level private equity funds (both business and real estate)? It seems to me that by know there should be a Betterment / Wealthfront / Robo-Advisor for Private Equity / Alternatives, i.e.: most interaction is online (maybe some chat or brief calls); there is a good, automated allocation/diversification methodology; good exposure to quality managers; and it is all done on a low-fee basis. PE is a fantastic and growing asset class (growing much faster than public). There needs to be a way for investors beyond institutional and the ultra-rich to properly allocate here. 

Any ideas here? Is this something that others are looking for? 

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4 Replies
Explorer ○

Re: Low-Fee Private Equity / Alternative Investment Approach

Look at BX, BAM, OAK, OCSL, HTGC.

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Follower ○○

Re: Low-Fee Private Equity / Alternative Investment Approach

Thanks DrewG. 

I am more interested in investing directly in the funds rather than in the firms themselves. 

Institutions, the ultra rich, etc. earn their premium returns through direct fund investment. I'd love to see if anyone knows of ways to do this, or at least is looking for something similar. 

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Explorer ○

Re: Low-Fee Private Equity / Alternative Investment Approach

There are 2 British closed end funds that might be of interest:

RCP:GB - This is the Rothschild investment vehicle.  Very diversified but sells over NAV. RIT Capital Partners.

CLDN:GB - This is the Cayzer family investment trust.  Sells at a 17% discount to NAV.  Caledonia Investments.

Both have thinly traded ADRS.

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Participant ○○○

Re: Low-Fee Private Equity / Alternative Investment Approach

we can discuss an alts portfolio only. pm me.

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