A Focus on Private Capital Solutions
Private Capital Funds
Private capital is an umbrella term for investment, typically through funds, in assets not available on public markets. We define private capital as private investments encompassing the following asset classes: private equity, venture capital, private debt, real estate, infrastructure, and natural resources.
The various asset classes that now comprise private capital originally emerged as an offshoot of private equity. While private equity as an asset class has a relatively long history, the industry only became mainstream in the past three decades, after a boom in leveraged buyouts in the 1980s. As private equity investments became more prevalent, new categories of private investment also emerged, with a growing number of private equity funds targeting opportunities in real estate, infrastructure, and – most notably since the Global Financial Crisis (GFC) in 2008 – debt. Over time these categories of investment have institutionalized to become independent asset classes in their own right.
Compared to public markets, private capital fund managers typically take a more active role in the management of the companies and assets in which they invest. They will often contribute to business strategy and can play a part in directly managing assets. The nature, size, and structure of investments in private capital can vary significantly, but generally funds are seeking to create value or support growth of the companies and assets in which they invest. The intention is to secure strong returns on behalf of their investors over a pre-determined lifetime.
Separate Managed Accounts
A separately managed account (SMA) is a structure with a portfolio of assets managed by our investment professionals with a specific remit. The growing universe of separately managed accounts targeted toward HNW and UHNW individual investors. Whether you refer to them as "individually managed accounts," "separate account," or "separately managed accounts," these individual-oriented managed accounts are increasingly popular.
SMAs offer more customization in investment strategy, approach and management style than traditional funds do. SMAs differ from pooled vehicles like mutual funds in that each portfolio is unique to a single account (hence the name).
The high level of customization is one of the main selling points for SMAs, particularly when it comes to individual accounts. Portfolio transactions have expense and tax implications. With managed accounts, investors may feel like they have a greater degree of control over these decisions, and that they are more closely attuned to the objectives and constraints set forth in the investment policy statement.
In addition, investors can impose restrictions on how the account is managed. Separately-managed accounts are a vehicle that is ultimately designed to provide HNW and UHNW clients with the kind of personalized money management that was formerly reserved for large institutions.
Commingled Funds
A commingled fund is when capital from multiple investors is pooled to form a fund that is invested in aggregate. In a commingled fund structure, fund managers raise pools of capital from multiple external investors to form a fund with a specific strategy. The managers use this pooled capital to invest in a number of agreed strategies. The terms of the fund outlines the details of investments to be made, any specific requirements from the investors.