Geller Law
Recently published in the National Post was a clear sighted assessment of private equity (Exempt Market) risks. Much comes from the inherent behavioral bias and conflicted interests of investment managers. Tom Bradley, as always, is careful not to criticize colleagues shilling EMD funds, but his analysis should send shivers down all but those who like blind gambles in casinos. This is a classic area of pump and dump with stickie commissions incent bad financial advice.
" Stocks in the public market are instantly repriced when there’s news or the outlook changes. That’s not the case for private assets. Price adjustments take time and are at the discretion of the investment manager.
This pricing lag is part of the charm of holding private equity, debt and real estate in your portfolio. They behave differently than public markets and are wonderful diversifiers. It would seem, however, that private valuations have strayed far from what similar assets are trading for in the public arena.
There’s an argument that the privates have it right. Public markets are irrational at times, with price volatility that doesn’t reflect what’s happening at the underlying companies. I get that, but I feel like I’m reliving the classic behavioral study that asked participants how good a driver they were and 80 per cent said they were above average. In this case, too many firms are saying their portfolios of companies and loans are doing well despite an economy in transition and higher financing costs.
I can’t help but wonder who is putting money into funds holding private assets that have done so well when they can buy similar companies on the stock market that are marked down.
Whether you agree or not with my interpretation of these conundrums, hopefully, I’ve alerted you to some potential clunks." Steadyhand Tom Bradley
