At Reach Alternative Investments we are democratising the world’s leading private markets funds by providing investors the same level of access and support that an institution receives.
We recognise that many of our clients are likely to be first time investors in private markets. As such, in opening access we think it is responsible to provide access only to funds and strategies from managers that have proven to be able to successfully invest and grow capital across different market cycles.
Therefore, when selecting a manager and fund we undertake a rigorous investment due diligence process before the fund is made available to our clients.
While our due diligence process does not guarantee that a fund/manager will be the best performing fund/manager nor even achieve its investment performance objectives, being selective ensures that we are selecting opportunities with more understood investment performance over the longer term than if no due diligence was conducted.
We believe it is important to release a summary of our due diligence findings to our community so that you can understand why we selected and listed a particular fund.
Please note carefully, our Summary Fund Assessment is not advice nor a recommendation to invest, it simply summarises the reasons why we have made it available on our portal. No reliance should be placed on this summary and clients and prospective clients will need to conduct their own due diligence to assess whether a particular fund is suitable to invest in.
There is a significant amount of work that underpins our Summary Fund Assessment but the document itself is only a summary of the findings from our investment due diligence as we want to make it accessible across our client spectrum.
In this article we describe and explain why we include each of the four key components of our Summary Fund Assessment, namely:
(a) Overview of Summary;
(b) Why we like the Fund;
(c) Performance Pattern; and
(d) Fund specific watch points.
Each Summary Fund Assessment can be found in the respective data rooms of the funds available on our portal. Clients will need to sign in to the Reach Alts portal to access them.
Overview of Summary Fund Assessment
The Overview of the Summary Fund Assessment is intended to give readers a short description of what we think of the Fund. It is broken up into four sub-sections which we describe below.
1. Overall Score:
The Overall Score summarises our assessment of the Fund in a single metric. It is a weighted average of the Disaggregated Scores (see section below) and is determined on a peer relative basis. A score of 3 means that the fund is in line with peer funds while a score above 3 indicates that we consider the fund to be better than the median peer fund. If a fund scores below 3, it is unlikely to be listed on our platform.
2. Disaggregated Scores:
The Disaggregated Scores represent how we rate the managers in the broad assessment categories that underpin our due diligence. They are comprised of the weighted average scores we assign to more specific criteria e.g. under the “Investment Staff” category we assess things like investment skill, experience, resource adequacy, team leadership, team dynamics etc. As noted above, the Disaggregated Scores are assessed on a peer relative basis.
Note our assessment criteria can be nuanced e.g. funds that are restricted to investing in certain markets/sectors are likely to receive a score of 3 since they are not considerations for the fund. This may give the appearance that a fund is peer median-like for particular criteria when in reality they have received that score because it is not a consideration. As such, it is possible for a fund to be available on our portal even though it may appear peer-median like on certain criteria.
3. Fund Description:
This sub-section provides a brief description of the fund to provide some context for what is being assessed. It is not intended to replace the information regarding the underlying fund, which can be seen in the underlying fund documents, including the private placement memorandum.
4. Relative Risk & Return:
This sub-section illustrates where we believe the Fund sits on the risk and return spectrum relative to other asset classes. It is an illustrative graphical representation (and should not be interpreted as an accurate portrayal of risk or a guarantee of return). The graph helps give a broad illustration for where the Fund could fit in a hypothetical investment portfolio (e.g. given the risk associated with a Private Equity allocation, it is unlikely to replace a lower risk asset class such as cash).
Why we like the Fund
In this section of the Summary Fund Assessment we list the key attributes of the fund/manager that we like about them. It is not intended to be an exhaustive list of our likes, rather it is supposed to indicate the characteristics of the fund/manager that we considered internally differentiates them from their peers/competitors.
The performance pattern section of our Summary Fund Assessment provides a snapshot of some of the key characteristics of prior vintages of the fund:
along with their historical investment performance track records and accompanying commentary:
The key characteristics show how the prior vintages of the fund have evolved over time, while the historical performance track record and accompanying commentary gives readers a quick sense of how the manager has performed historically and whether they have managed to achieve their stated investment performance objectives (refer to our article which explains how investment performance is measured in private markets, which is available here). It is always important to note that past performance is not a reliable indicator of future performance and specific risks may impact on the possibility of such returns.
While it is not a reliable indicator, when comparing past performance across managers, it might be valuable to distinguish between managers who have repeatedly failed to meet their targets and those that have, particularly when there are long track records. While undoubtedly circumstances will have influenced the outcome, the more data points, the more it may speak of the skill of the manager.
Having said this, the raw investment performance figures are not the most important reason for why performance track records matter. You can read about why performance track records are important here.
Fund specific watchpoints
In this section of the Summary Fund Assessment we list the key considerations that we would watch out for in the Fund. The “Fund specific watch points” is not intended to be an exhaustive list of watch points nor does it cover generic issues related to private markets that investors should consider (e.g. limited liquidity). Rather, the purpose of this section is to highlight what we considered were issues to keep a watch on. Both the Information Memorandum and the underlying fund private placement memorandum, detail extensively risks involved. These should also be considered in your deliberations.
It is important to remember that you must conduct your own research into the opportunities that we offer. The purpose of our summary is only to provide transparency to our community as to why we considered it appropriate to list a fund on our portal. It must not be relied upon as we are non-advisory and accept no responsibility for any reliance.If you need assistance, we strongly recommend you seek professional financial advice. A financial adviser can assist you in understanding the risks and potential benefits of investing in such an asset class.
For more information about our available private equity funds, please visit our private equity funds page.