A survey of financial planners to determine levels of understanding of and demand for private equity investment trusts, conducted by the Initiative for Private Equity Investment Trusts (iP
A survey of financial planners to determine levels of understanding of and demand for private equity investment trusts, conducted by the Initiative for Private Equity Investment Trusts (iPeit) and the Institute of Financial Planning, indicates that increasing interest in the asset class is being driven by client demand.
The findings are based on detailed responses from 149 IFP members, only 19 per cent of whom were already investing in private equity investment trusts on behalf of clients. A third of all respondents and 70 per cent of those already investing in Peits said they were receiving enquiries from clients about private equity.
Meanwhile, 28 per cent of those who had never before invested in Peits – the majority of whom managed smaller portfolios – said they would be doing so for the first time this year, and 90 per cent of those currently investing would be maintaining or increasing their Peit levels.
Inevitably, the 19 per cent already investing in Peits demonstrated greatest understanding of investment in listed private equity, but focus on long-term needs as well as client demand is spurring increasing numbers of IFP members to learn about London-listed Peits, which offer access to private equity for the retail investor as well as institutions.
Peits have been available on the London Stock Exchange since the 1970s. Although there are only 20, they account for GBP10bn in assets and offer considerable diversity, covering single manager Peits through to funds of funds, different or all geographical regions, specific or all investment stages (start-up through to large buyout) and different styles of investment. Data from the Association of Investment Companies shows that Peits have consistently been the AIC’s top or second best performing sector over 10-year periods since 1991.
IPeit was formed last autumn by ten Peits to address a lack of awareness and understanding of Peits amongst private investors, their advisers and smaller institutions, primarily through an informative, non-promotional website (www.ipeit.com) and research studies. Since last September, the web site has received more than 60,000 visits and is much used by investment professionals.
The members of iPeit are August Equity Trust, Bear Stearns Private Equity, Dunedin Enterprise Investment Trust, Electra Private Equity, F&C Private Equity Trust, Graphite Enterprise Trust, Hg Capital Trust, Pantheon International Participations, Rutland Trust and Standard Life European Private Equity Trust.
Mirroring the findings of a 2006 iPeit survey of the UK’s largest private client stockbrokers, investment managers and wealth managers, 77 per cent of the IFP respondents – and all those with Peit experience – considered Peits useful in portfolio diversification. All respondents anticipated holding Peits for more than three years and 88 per cent expected to hold them for five years or more.
Among respondents who already used Peits, 76 per cent were pleased with performance, while 45 per cent of the total sample and 59 per cent of those using Peits believed they were suitable for SIPPs.
‘The IFP and its membership need to understand how the increasingly popular asset class of private equity might affect their investment strategies,’ says chief executive Nick Cann. ‘Many financial planners favour fund supermarkets and wrap programmes, but not all of these make Peits available. As Peits provide valuable portfolio diversification and good long-term performance, it is crucial that Peit options are available on the desired platform to enable financial planners and other IFAs to meet client needs and demand.’
Ross Marshall, chief executive of Dunedin Capital Partners, adds: ‘The findings of this survey are most encouraging. I am sure financial planners will find ways of accessing the relevant investment vehicles via platforms and wrap technology, not only to meet client demand but also to ensure business efficiency and minimise costs.’
The survey probed what information resources financial planners and their clients use on Peits. Some, especially those managing larger portfolios, tended to use broker and analyst research; others used individual Peit websites and reports, alongside performance data from the AIC and Trustnet. However, the overwhelming view was that information on Peits for those unfamiliar with the market was difficult to find.
IPeit is keenly aware that this market is under-served by information sources and will shortly be making available more information and data on the web site to enable professional advisers and private investors easily to compare individual Peit performance and make informed investment decisions. IPeit will also be participating in a seminar on private equity at the institute’s annual conference.
Formed in 1986, the IFP now currently serves more than 1,500 members and more than 660 certified financial planners through a programme of national events and training courses, plus a regional branch network. Membership is drawn from all parts of the financial services community – around 75 per cent are IFAs, 20 per cent come from accountancy and a small percentage from the legal world and tied markets.
