Investment Criteria for SMSFs: How to Choose a Private Equity Fund

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Reach Alternative Investments
October 31, 2023
min read

Investment Criteria for SMSFs: How to Choose a Private Equity Fund

Despite experiencing a surge in popularity over the past few years, private equity doesn't always get the limelight it deserves. For self-managed super fund (SMSF) trustees, taking an informed and measured approach to private equity investments can significantly enhance their portfolios. A notable example of such an investment avenue is Reach Alternative Investments, an investment portal designed to introduce wholesale clients to the competitive world of private equity funds. This article guides SMSF trustees looking to diversify their investment portfolios using private equity funds through the critical factors to consider.

What is private equity and why is it significant for SMSFs?

Private equity refers to capital investment made into private companies that are not publicly traded. The injection of private equity into a company can stimulate business growth, engineer business turnarounds, or prepare the company for a public listing or sale. As a long-term investment strategy, private equity offers the potential for higher returns compared to traditional investment forms and as such is an attractive asset for SMSFs seeking growth and diversification.

What drives a successful private equity investment?

A successful private equity investment is influenced by several factors, fundamental among them being the selection of high calibre fund managers. At Reach Alternative Investments, a rigorous research process across the year singles out a select number of top-tier private market funds from the world's leading fund managers to offer to investors. These fund managers are adept at identifying promising businesses, structuring lucrative deals, and delivering returns (past performance is not indicative of future performance).

How does Reach Alternative Investments facilitate private market investments?

In a bid to democratise access to private market investments, Reach Alternative Investments synthesises a legal structure in Australia to present these opportunities to the wholesale investors. Via the investor portal, investors can access available opportunities, delve into the fund's particulars and related research work, and interact with the investment team. This strategy allows investors to make informed decisions, complete all necessary documentation, and receive tax reporting seamlessly, thereby enabling a comprehensive private market portfolio build-up.

What level of investment is required to get started in private equity through Reach Alternative Investments?

One of the misconceptions about investing in private equity is that it requires an enormous capital outlay. However, through Reach Alternative Investments, investors have an opportunity to leverage the benefits of private equity for as little as AU $15,000 into a fund. This accessible entry point reduces the barrier to entry, making private equity a more inclusive asset class.

What risks are associated with private equity investments and how can these be mitigated?

If not properly managed, private equity investments can expose investors to higher risk levels compared to traditional asset classes. However, Reach Alternative Investments looks to mitigate some risks by utilising a prudent approach, focusing on funds from the world's top fund managers and maintaining an exceptionally high due diligence standard. Additionally, by investing in multiple funds instead of individual enterprises, investors can spread their risk, further enhancing their portfolio's diversification.

Why should SMSFs consider private equity?

In a volatile economy, the potential for high returns offered by private equity is attractive to SMSF trustees seeking to grow their retirement fund. Reach Alternative Investments provides the means and the platform for SMSF trustees to confidently step into the world of private equity investments, armoured with the knowledge and the tools to make an informed investment decision.

Whether a sophisticated or professional investor, understanding the nuances of private equity investments and how they can contribute to your investment portfolio is key. Each investment decision must align with your fund's investment strategy, providing not just for your immediate financial needs but shaping your future financial security.

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