The financial markets all over the world have been very unpredictable at this point in time. Nobody knows what would be the macroeconomic implications of Britain’s exit, which is a highly political matter. But that’s not it. In other parts of the world such as Canada, the housing bubble which seems so like the one that caused a dent in the world economy in 2007. The current epoch offers no respite as the bitcoin and other digital currencies continue to give the currencies of largest nations a run for their money, literally.
Such situations are highly risky from the point of view of the investors. And it is for this reason, that top private equity firms have started seeing an upwards trend towards funding coming from both institutional investors. Digest this for a fact, the total worth of Private Equity assets spread across the world is $4 trillion. Of this, as much as 8% is allocated to family-owned offices. High Net Worth Individuals who have at least $10 million in investable assets have released more funds to PR firms.
Private equity trends also suggest a change in the archaic fund-based PE investment as the mindset of investors now allocate money by means of co-investing. With time, this self-taught investor is poised to hit the ground running. The greatest benefit of this would result in greater flows of money into the PE world which in turn would further create more private equity jobs. This is an extremely good sign, as hedge funds would face the heat from top private equity firms, as their management fees are almost equal, 2%.
Co-investment would flag-off the race to better entrepreneurial avenues. And entrepreneurship, as we know, builds a nation. The advantage that such wealthy individuals bring to the table, on having entrepreneurial networks, is that they get a heads up on which opportunities to put their money on. Like a cyclic process, with the capital ready at the behest of such individuals, the ability of the best private equity firms to bring in the cash flow increases exponentially.
You might be tempted to ask, how is this useful? It is useful because, in the current time, everybody is fighting for capital to procure greater assets. Bids, that have grown competitive by the day see premiums in the vicinity of 31% being paid out by the Buy-out firms. Imagine how swiftly the deal would go through if the negotiating party knew that they had a big chunk of cash waiting for them in the form of high net worth individuals. HNWs have also in the past propelled many economies out of the recession of 2007. We say this because people funding-rounds have started experiencing the pre-2008 levels of endowments.
For some time to come, this is expected to remain the trend as family owned, boutiques of Private equity firms grow larges in size and further fuel the growth of already progressing economies, inspiring others.