St explains: 6 things that need to know about private market investment funds for retail investors in Singapore

Singapore – The sharp sale in the global markets at the beginning of April-the US S&P 500 fell up to 12 percent and the Straits Times index by 14 percent in just one week-investors fell to investors how flowing public markets can be.

The conventional advice is to rest the market administrations, but how many investors can stay ground and panic?

Ms. Kerrine Koh, head of Southeast Asia in the Hamilton Lane, one of the largest private market investment companies in the world, said people become emotionally about how their investments develop.

She added that the investment in less liquid investments could protect these investors from hasty decisions.

An example of such less liquid assets are private market investments, a group of alternative investments that are currently accredited investors, individuals with high network value and family offices.

The Singapore (MAS) monetary authority examines the possibility of expanding access to private market investments, which include private -equity, private loans and infrastructure, here.

The Straits Times take a look at private market investments and finds out how suitable they are for retail investors.

1. What are private market investments?

Private market investments are investments in private companies or companies that are not listed on a public stock exchange and are therefore not largely accessible to investors.

Some examples of private companies in Singapore are the online car market carro and the e-commerce platform Carousell.

Ride hailing and delivery companies Grab Holdings and Gaming and E-Commerce Company Sea are examples of private companies that are later listed in the USA and have been public companies.

Ms. Koh from Hamilton Lane said that private companies are all around us.

“There are about nine private companies for every listed company that has an appropriate size that achieves sales of $ 100 million ($ 130.6 million) or more,” she said.

Investment In These private companies can be in the form of private equity, which contains an equity interest in a non -listed company. Or you can be in the form of a private loan, which refers to loans that are extended by non -bank loans to these companies.

Ms. Dora Seow, Managing Director of Natixi's Investment Managers Singapore, said that other types of private market investments include investments In Private real estate projects or real estate funds.

Infrastructure investments in essential services and institutions such as transport, supply and energy projects, which are of crucial importance for the functioning of society, can also be classified as private market investments.

She added that natural resources, including agriculture and arable land, Timberland and water, are another interest for private market investors.

2. Are private markets immune to daily market volatility more than public?

Ms. Anastasia Amoroso, Chief Investment Strategist at Icapital, said that private markets have historically performed less volatility as public markets, since the private market assets were not marked for daily market launch.

This means that these assets are not assessed on their market prices on their individual day.

As a result, they are not subject to daily trade fluctuations that can create large discrepancies from the intrinsic or real value, especially during stress times, noticed Mr. Hugh Chung, Chief Investment Officer at Digital Wealth Platform Endowus.

3. How can private market investments create the portfolio of a retail investor?

MS Seow from Natixis Investment said these investments offer diversification options, since there is a low correlation or a weak relationship with the public markets.

If the correlation is low, private markets move independently of the public markets. This can contribute to alleviating the overall risks in the portfolio of an investor in times of market volatility, she added.

She also found that these investments use retail investors in unique companies and assets that are not accessible by public exchanges in order to enable themselves to open up opportunities that can increase their portfolios to considerable growth.

But there must be greater investor education in this wealth class.

Ms. Adeline Tan, head of investments in Asia at Mercer, said that investors are not willing to select their own private market funds in which they will need to invest and need investment advice.

In addition, she added that the banks' relationship managers have to do training so that they can understand and explain how these investments work on retail investors.

4. Private market investments are long -term

As soon as a retail investor has understood more about the private markets and it is ready to dive a toe, he will find that financial experts will be advised that this is a long -term commitment.

He must be sure that he will not need the money that is locked up in his private market investments in the near future.

Ms. Seow from Natixi's investment said that private asset funds are usually kept for 10 to 12 years, while some infrastructure funds need to be locked up for up to 30 years.

Ms. Koh from Hamilton Lane said you might think about your investment goals and your investment horizon to determine whether private markets are a suitable investment vehicle.

She added if an investor 2026 saves for a vacation if he searches for liquid investment options that he can easily sell within a year.

Private market investments are not so liquidated and are better suited for a person who invests in retirement in 20 or 30 years, she said.

And just like in public markets, in which investors pursue a diversified approach, the same advice applies to the private markets, said Chung of Endowus and added that a diversified portfolio is minimized the risk of permanent capital loss during the demanding economic times.

The fees collected by the fund should also be taken into account in the investment decision.

Ms. Seow noted that retail investors should look for management fees, performance fees and other costs to evaluate how these fees affect their investment results.

5. What are some other risks?

Retail investors also have to show that private assets cannot act as an air film foil for their portfolio if the investment area becomes acidic.

Foundation ' Mr. Chung said that private markets were not spared if the growth outlook deteriorates or if there is a lengthy economic downturn.

He found that under such circumstances the value of the portfolio companies held by private equity funds, such as their colleagues in the public market, will still be affected. These means will also find it more difficult to pursue mergers and acquisitions or list their portfolio companies.

In addition, private credit funds that are awarded to private companies can have higher failure rates in a weak economic environment, said Chung.

Mr. Kevin Teng, Managing Director of Wrise Private Singapore, found that private equity or private credit assets are only illiquid versions of their public colleagues.

There is therefore a need to be selective and to practice additional due diligence in relation to private market offers.

This lack of liquidity can harm an investor if the markets turn south because he will find that he cannot sell his assets as easily as he would have been in public markets.

Yale University in the USA is a typical example. The university was one of the first foundation funds to shift part of their investment assignment in less liquid alternatives, especially in private equity.

It was recently reported that Yale tried to sell up to 6 billion US dollars or a third of his private equity investments in the Secondary market. This market allowed Private equity investors to leave their investments before due date by selling them to other investors for a discount.

6. How can retail investors access private market investments?

In Singapore, the MAS proposed a long -term framework for the investment fund for private market investment funds in retail.

The authorities examine two fund structures. The first is a direct fund in which the fund manager invests directly In private companies.

Ms. Koh from Hamilton Lane said that a direct fund manager usually acquires 20 to 30 companies to form a diversified corporate portfolio.

The second option is a long-term investment fund of fund structure that invests in other private market investment funds.

Ms. Koh said a typical one Fund for medium Invested in 10 to 20 fund managers, with everyone investing in 20 to 30 private companies.

This structure is more diversified because the retail investor essentially invests in up to 600 private companies, in contrast to a direct fund manager who has 30 companies in his fund.

However, the structure of the fund is more expensive because it calculates two Layer From fees, noticed Ms. Koh.

This is because if the investor invests in A Fund for mediumHe must pay the fees raised by his fund manager and the fees raised by the underlying funds.

MAS invites plants and proposals to the proposed framework for private market investment funds in retail until May 26th.

Connect St's Telegram Channel and get the latest Breaking messages to you.