Financial advisor Jeff Nauta may invest some of his high-net-worth clients’ money in the Central Park Group’s Carlyle Private Equity Fund, a closed-end interval fund that invests in private equity.
But he won’t be parking more than 5 percent to 10 percent in the fund.
“The upside is the opportunity for higher returns and the potential for diversification within the portfolio,” said Nauta, who manages $150 million with Henrickson Nauta Wealth Advisors in Belmont, Mich. “The downside is potential illiquidity, depending on the fund.”
Central Park Advisers filed an application for the CPG Carlyle Private Equity Fund last year. The fund will be the first to allow entrée directly into its buyouts, which have the potential to be more lucrative than stocks and bonds, according to the Wall Street Journal. The paper adds that some private-equity firms are coming up with “down market” offerings and want to be able to offer their funds through 401(k) plans, as they see future money from defined benefit plans as uncertain.
“The value add of the CPG fund is the potential for liquidity,” Nauta said.
He noted his firm is not investing in private equity for diversification. “We are investing in it as a return enhancer. As long as we beat public equity by 3 percent to 5 percent, that’s what we are shooting for. We expect 3 percent above public equity.”
Private equity managers have an estimated $3.2 trillion in assets under management globally, says Preqin, which provides data and research on private equity.
“Private equity has been largely out of reach for retail investors who typically do not meet accredited investor rules and do not have several million to invest,” said Nadia Papagiannis, director of alternative fund research at Morningstar.
Although the CPG Carlyle private equity fund is not yet launched, it is a ‘40 Act registered fund with a minimum investment of $50,000 and its liquidity is limited to a 5 percent quarterly tender. Investors must have accredited investor status.
“The fund will manage liquidity through its commitment strategy by holding cash that has been committed to underlying private equity funds but have not yet been deployed,” said Papagiannis.