It should come as no surprise to you that I'm a big advocate of investing in private equity—specifically, private equity real estate. There are good reasons for this, such as PE's low correlation with the stock market and relatively low volatility compared to other asset classes.
But I'm not the only one touting private equity investments. Just last week, there was an article in the Wall Street Journal that discussed why wealthy investors are "piling into" private equity. You can check out that article here.
"Individual investors are increasing their bets of private-equity vehicles, hoping that these funds' long-term horizon will offer a refuge from volatile public stock and fixed-income markets," Chris Cummings, the article's author, writes.
In layman's terms: the stock market is prone to wild swings, often on a daily basis. The S&P 500 is down a staggering 17% this year alone. This degree of volatility makes individual investors skittish (especially those who are nearing retirement age and will be counting on their investments for future income). Private equity, traditionally considered an "alternative investment," is proving to be more stable. As a result, many wealthy individuals are rebalancing their portfolios to include more private equity investments, especially in self-storage.
To learn more about our Fund III and how it is helping investors like you diversify from stocks to mitigate market volatility, click here.
iCapital Network, Inc., a financial-services company with PE funds open to individual investors, reported to the WSJ that assets serviced by their company were up an estimated 16% so far this year. The company's chief investment strategist noted that its private-credit and private-real estate funds have been in especially high demand this year.
"An asset class with a longer-term investment horizon, whose job is to allocate capital over time, becomes an attractive proposition in a downturn," she said.
The Blackstone Group, which has three funds open to high-net-worth individuals, reported back in April that these funds are bringing in $4 billion to $5 billion per month now.
Most of these funds are only open to accredited investors—i.e., those who earn at least $200,000 per year or have $1 million in net worth (not including their primary residence). Traditionally, these investors only accounted for a minuscule portion of private equity investments. Most PE investments are made by pension funds, endowments and other institutional investors. To put this in perspective, on average, pensions and endowments have nearly 25% of their portfolios invested in PE. The individual, private investor has only 1-2 percent invested in PE.
The WSJ article goes on to explain why PE firms are making a push to attract individual investors. The article notes, for example, that some pension funds have expressed concern over being too overly invested in illiquid private funds (like real estate) and instead, are starting to temper the pace with which they invest. This puts pressure on PE firms to identify new sources of capital—and who better than individual investors?
Indeed, here at Reliant, our Fund III, with a projected 12-15% IRR across a range of well diversified locations, we are seeing more individuals seeking to balance their investment portfolios with high return, low volatility self-storage assets.
But given today's economic realities (rising interest rates, skyrocketing inflation, stock market volatility, etc.), this could prove to be a win-win. PE firms may be looking for more individual investors, but we suspect individual investors will be chomping at the bit to invest with them, too. These days, PE is looking more attractive than ever - particularly among individual investors who want to diversify into more stable, predictable and cash flowing assets like self-storage.
Our Fund III not only offers ongoing cash flow from rents to investors but provides significant tax benefits and the opportunity to almost double your money during our hold period. Click here to learn more.