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Checking in on private companies and crowdfunded investments [Members]
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I just LOL’d my coffee all over the desk at the phrase “Flight To Crap”. Thanks for that unexpected hilarity!
@TI – Great article.
Maybe as a side effect of the Magnificent Seven, or whoever it is this week, if more PE and retail investor money is chasing returns there, there’s less to go to other investments. Hence the widening discounts.
Infrastructure funds are baffling though. You’d think, and I’m betting on, governments needing PE to find all this stuff we need. Sure the contracts will have to be tighter, no more heads I win tails you lose stuff,
And levelling the playing field by abolishing abolishing stamp duty on shares might help.
@Baron — Hah, yes in more genteel times (um, the GFC) I believe we called it a ‘dash to trash’.
@Brod — Yes, ‘flows’ are certainly a factor. If money has been draining out of UK funds (which it has) and away generally from active strategies (which it has too) then the more marginal stuff is likely to suffer more.
I don’t particularly mind if the underlying assets still perform, from a selfish perspective. Having avoided infrastructure trusts for many years on their big premiums, I bought on big discounts and I’m on track to do more than 20% for the year with them I hope (famous last words) with every expectation of at least 10% going forward. Buying on a 7-9% yield can do a lot of the heavy lifting for you! 🙂
The risk is the market has identified something broken with the asset class generally. That’s my fear with renewable energy trusts, but infrastructure looks fundamentally ok and trade sales provide some comfort too.
Yes, but, given discounts, what we’re left with is a declining rental agreement.
I too organized my income portfolio with some infrastructure trusts. But what if, due to wide discounts, they can’t get the capital for new investments?
They’ll have to take a sell-at-the-peak strategy to reinvest. Fingers crossed
Superb piece. Excellent stuff – as I said in my DM, best yet I think.
Actionables?
Harborvest – I hold as bedrock of listed PE exposure. Brought when discounts in 40s%. Not adding yet (given discount narrowing), but definitely not selling either. Possibly it’s the best in class given its unrivalled diversification in both numbers and range of underlying investments.
RCP/RIT – I effed up the timing on this and somehow managed to buy in at almost the ATH. Ouch. Hanging on only if / until it’s a bit less underwater. Give it max 24 months. Main beef is the formerly successful and long standing management team has unfortunately recently changed.
Gen. Infra – topped up a little with HICL. Previously, over the past year or so, I just split the modest infra allocation equally between the main infra trust less 3i (which is a rule onto itself, given its size).
Renewables ITs – no idea what to make of this lot. Clearly some sector distress. Over on the ‘First they Came for the Call Centres’ thread I’ve just added thoughts on 2nd order implications of AI mania for deeply unfashionable energy infra sector. Global renewable ITs *should* be exposed to easy scale up as *the* preferred Data Centre power source. Build your DC in a sunny place (Texas say). Build a massive field of solar panels next to it with a huge battery array. Quicker assembly/ build out than nuclear (fewer planning issues), and no need to wait for grid hook up, as just plug in power to DC colocated on same site. But it seems too neat and tidy as a narrative; and all the fintwit/Substackopia chat is on using shale gas or cheap coal plus SMRs. So maybe Geiger Counter Ltd IT (GCL) plus some coal plays is better (???). Uranium is buyoant now whilst coal still bombed out (although it’s showing definite signs of life, along with rare earths, under Trump’s America first energy agenda). I fear that UK wind stuff is toast if Reform get in, and 4 years and counting is closer than you think in terms of that risk sadly eventuating.
Augmentum – 70% implied NAV discount on the other assets is bonkers. So I’ve just topped up a little, albeit from a very low base (and the holding is still miniscule overall).
We’ll see. As @Brod says, fingers crossed.
@Delta Hedge — Thanks for the thoughts and nice words. RE: renewables ITs, I just saw Brookfield has raised another $20bn fund for energy transition assets. Something funny is going on with these funds, but I’m not persuaded that they are definitely an opportunity. With that said I don’t think Reform is likely to nuke property rights or existing legals, so presumably it’d be more of a run-off situation. As suggested above by another member re: infrastructure.
@all — Just read this interesting article from last week that similarly explores the death of public versus rise of private, FOMO at missing exposure to growth assets, etc. US perspective but arguably in the markets We Are All Americans Now given the US weighting!
https://www.strangeloopcanon.com/p/anomie?hide_intro_popup=true
Re: Brookfield’s $20bn fund for energy transition assets: if AI’s the new oil, then energy + infra are the refineries / pipelines except this time it’s electrons rather than barrels that make the world go round!
AIC’s Commodities & Natural Resources sector (7 ITs total) surged ~42% past year due to supply constraints, geopol tension + demand from electrification/AI.
BERI & RSE could look well placed. Likewise perhaps for BRWM, GPM and CYN. GRID I’m more sceptical of, but the 71% six months return to June is either impressive or overblown. In any case though 70p now is a far cry from the 170p which that one sat on in Sep 22.
Whilst the US indices churn out mature incumbents, the big compounding engines are quietly enriching PE & VC backers. Public markets getting late stage hand me downs, with more exit liquidity for founders than convex opportunity for retail.
That’s where ITs *should* come in.
Pantheon Infra and Cordiant Digital Infra are (supposedly) building exposure to the AI/energy backbone.
And, with many of these on 20–30% discounts with yields nudging double digits, collateral damage from high rates and investor fatigue might already be priced in (?)
A private 1st and for longer world might mean listed equity returns are permanently lower than history suggests.
But, in the meantime, perhaps it might just be worth owning a little bit of a few of the discounted ITs exposed to wiring this future together, or to companies owning the resource needed to do so: e.g. silver now sits right at the crossroads of the AI buildout and the energy transition (solar, BEVs, grid + 5G connectivity) that enables it; and, as for rare earths, have you looked at the price action on say $ABAT or, more broadly, LSE listed $REMX ETF recently? 😉
Definitely not any sort of advice, nor a recommendation, naturally – just another random dude commenting to voice his inner investing monologue (and to out his active investing itch 🙂 )
p.s. re: “how we might value and account for unlisted assets for ourselves”: Christopher G Glover’s “Valuation of Unquoted Companies” (my copy is a second hand, 2nd edition, published 1992 by Gee) is a comprehensive (498 p) resource.
Are private markets now starting to show some signs of a rebound?:
https://open.substack.com/pub/privatemarketsnews/p/the-quiet-rebound-nobodys-talking
More yesterday on the giants of tomorrow staying private for longer today:
https://open.substack.com/pub/privatemarketsnews/p/why-the-giants-stay-private