Private Markets Are Becoming More Important
Private markets play a growing role in global investing. Private equity, private credit, infrastructure and private property investments represent a significant part of economic activity. Many companies also remain private for longer. This means some growth opportunities exist outside traditional public markets.
Why Private Markets Are Difficult to Access
Investing in private markets is different from investing in listed shares. Private investments require extensive due diligence and ongoing management, and capital is often committed for long periods. In addition, private markets do not provide daily price discovery. This can make governance and valuation more complex for institutional investors such as pension funds.
How ETFs Support Private Market Investing
ETFs cannot make private markets liquid. However, they can support how institutional investors manage their allocations. ETFs can act as a liquidity sleeve. Capital that is committed to private investments can be invested in a liquid ETF until the private market manager calls the capital.
Reducing Cash Drag
One challenge in private market investing is cash drag. Capital is often deployed gradually over time, which means uninvested capital may sit in cash. Using ETFs allows that capital to remain invested until it is needed.
Balancing Costs
Private market investments typically involve higher fees because of the work required to originate and structure deals. Combining private assets with a low-cost ETF can help manage the overall cost of the portfolio.
A Tool for Institutional Investors
This approach is primarily designed for institutional investors such as pension funds. ETF allocations can be tailored to support each institution’s private market strategy.
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Disclaimer:
Satrix Investments (Pty) Ltd is an approved financial service provider in terms of the Financial Advisory and Intermediary Services Act, No 37 of 2002 (“FAIS”). The information above does not constitute financial advice in term of FAIS. Satrix Managers (RF) (Pty) Ltd a registered and approved Manager in Collective Investment Schemes in Securities. Collective investment schemes are generally medium- to long-term investments. With Unit Trusts, Exchange Traded Funds (ETFs) and Actively managed ETFs (AMETFs) the investor essentially owns a “proportionate share” (in proportion to the participatory interest held in the fund) of the underlying investments held by the fund. With Unit Trusts, the investor holds participatory units issued by the fund while in the case of an ETFs and AMETFs, the participatory interest, while issued by the fund, comprises a listed security traded on the stock exchange. ETFs and AMETF are registered as a Collective Investment and can be traded by any stockbroker on the stock exchange, LISP platforms and or via online trading platforms. ETFs and AMETFs may incur additional costs due to it being listed on the JSE. Past performance is not necessarily a guide to future performance, and the value of investments / units may go up or down. A schedule of fees and charges, and maximum commissions are available on the Minimum Disclosure Document or upon request from the Manager. Collective investments are traded at ruling prices and can engage in borrowing and scrip lending. Should the respective portfolio engage in scrip lending, the utility percentage and related counterparties can be viewed on the ETF and AMETF Minimum Disclosure Document. The index, the applicable tracking error and the portfolio performance relative to the index can be viewed on the ETF and AMETF Minimum Disclosure Document. Performance is based on NAV to NAV calculations with income reinvestments done on the ex-div date. Performance is calculated for the portfolio and the individual investor performance may differ as a result of initial fees, actual investment date, date of reinvestment and dividend withholding tax. Some funds may hold assets in foreign countries and could be exposed to risks such as potential constraints on liquidity and the repatriation of funds, macroeconomic, political, foreign exchange, tax risks, settlement risks and potential limitations on the availability of market information.
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