With the growing popularity of self-managed superannuation funds (SMSFs), more Australian investors are looking towards private equity markets for potentially lucrative opportunities. However, with these investments come responsibilities and concerns, particularly for the trustees of these funds. In this article, we'll explore the role of trustees in SMSFs with private equity holdings, their obligations, and how they navigate through the complex landscape of private market investments.
Trustees play a crucial role in the management of SMSFs and this role becomes even more complex when private equity is involved. Trustees are responsible for meeting the SMSF standards and ensuring compliance with the Australian investment regulations. They decide on the investment strategy, monitor the performance of investments, and ensure that the SMSF stays compliant with the limitations relating to investment diversification and risk tolerance.
Before making the decision to invest in private equity, trustees need to conduct rigorous due diligence. This involves assessing the fund manager, analysing the potential risks and rewards, understanding the exit strategies, and considering the impact of the investment on the overall diversification of the SMSF.
There's no denying the potential benefits of investing in private equity; however, these investments come with their share of risks. These include liquidity risk, due to the long-term nature of private equity investments, and value risk, associated with valuation difficulties of the investment. Further, as private companies are not subject to the same level of regulatory scrutiny as publicly traded companies, transparency risk is a factor too. Understanding these risks can help trustees make informed investment decisions.
Reach Alternative Investments offers an efficient route into the exclusive world of global private equity markets for wholesale investors. We provide access to top-tier private market funds, undertake due diligence, and create a legal structure for your investment. Our easy-to-use platform allows you to view and evaluate funds, engage with our investment team, and seamlessly manage your private equity investments.
By understanding the role and responsibilities of trustees in managing private equity holdings within an SMSF, trustees can confidently navigate through this promising, albeit highly regulated, investment avenue. The right insights, due diligence, and compliance can help realise the superior potential returns that private equity markets may offer (past performance is not indicative of future performance).