Attaining a balanced Self-Managed Superannuation Fund (SMSF) portfolio is the Holy Grail for many independent investors seeking to maximise their retirement savings. One often overlooked aspect when it comes to diversifying your investments is the world of Private Equity. Not only can private equity offer a lucrative return, but it can also help achieve a balanced portfolio that proves steady during volatile market environments.
Private equity, in simple terms, is capital that is not listed on a public exchange. It comprises funds and investors that directly invest in private companies, or that engage in buyouts of public companies, resulting in the delisting of public equity. The investment in private equity often involves a long-term strategy centred around improving the operations of a company or facilitating its growth.
Private equity can be an excellent addition to an SMSF portfolio for diversification. This vehicle provides exposure to a different range of investments that aren’t available on public exchanges. Additionally, it offers the potential for high returns. With investments in start-ups and growing businesses, private equity can oftentimes outperform traditional equities, especially over the long term (past performance is not indicative of future performance).
Traditionally, the perceived complexity and high capital requirement have been barriers for private individuals to gain exposure to private equity. However, companies like Reach Alternative Investments have made the process significantly more accessible. With Reach Alts, you (wholesale investors only) can invest from as low as AU$15,000 into top-tier private market funds. Through their investor portal, you can view the details of each fund and their research, engage with an investment team, make your investment decision, and sign all documents in one place.
Like every investment, private equity also comes with its set of risks. These include the illiquid nature of the investment, the lack of transparency in comparison to public equities, and the potential for loss if the company does not perform as expected. On the other end of the scale, the potential for high returns is what makes this type of investment appealing.
Private equity can provide diversity to your portfolio by offering an asset class that may perform independently from traditional equities. By investing in private businesses with growth potential, you can expose your portfolio to high returns that, over time, could outperform the market, thus providing to be an effective tool in SMSF portfolio balancing.
In a climate of fluctuating markets, carving out a small section of your portfolio for private equity investments might be worth considering. While it does come with its challenges and risks, the alternative asset class of private equity can be a fantastic addition to your SMSF portfolio if managed correctly, offering potentially high returns and additional diversification (past performance is not indicative of future performance). Companies like Reach Alternative Investments have made the process easier and more accessible for sophisticated and professional investors, ensuring you can seize an opportunity usually reserved for the institutional players.