Ultra-high net worth (UHNW) individuals’ interest in private market investments has grown substantially in recent years. Oliver Wyman predicts that over the next five years, illiquid/alternative UHNW investments will grow by 8 percent annually to $24 trillion by 2024.
Direct investments (“directs”) in illiquid, or alternative, asset classes provide an opportunity particularly relevant to UHNW clients, given suitability challenges due to significant minimum capital commitments, long lock-up periods, tax/legal diligence complexity, and regulations in the U.S. and Europe. Directs are generally more focused investments, typically have lower fees, and offer investors the ability to cherry-pick ideas. Like other private equity-type investments, there is also a need to be patient. It can take years to reach financial objectives as underlying companies look to execute their business plans.
While not appealing to all investors, interest in directs has grown for those who enjoy becoming more involved in understanding their investment and how their capital is having an impact. The concept of participating in direct investments can closely mimic the investor’s own business activities; that is, an investor has far more transparency into an actual operating business. From that perspective, she or he can relate more to direct investments than passive investments, such as diversified equity ETFs, long/short equity hedge funds, or blind long-dated private equity funds.
For those investors interested in directs, significant value comes in having a team with the capabilities to help deliver, evaluate, and seize high-quality direct investment opportunities as part of their portfolios. TwinFocus has the proven ability and experience to analyze these types of investments from multiple angles. We tap our vast network, much of which comes from our client base of successful entrepreneurs and professional investment managers. We ask the tough questions to seek to uncover the known unknowns and unknown unknowns.
One of the recent directs we offered our clients was an investment in one of the largest motor insurance companies in the UK. TwinFocus partnered with GSO/Blackstone in creating an SPV in which TwinFocus was the largest shareholder, buying out the insurance division of one of the UK’s largest retailers. It has been over two years since this transaction was completed and the business is progressing according to plans despite significant COVID-related challenges to the UK insurance environment.
Disclosure: The specific direct investment identified and described above is not representative of all of the direct investments purchased, sold, or recommended by TwinFocus. It should not be assumed that any direct investment identified has or will be profitable. There can be no guarantee that similar investment opportunities will be available in the future or that TwinFocus will be able to exploit similar investment opportunities should they arise.
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