Man Numeric’s strategy emulates a private equity portfolio’s returns but at a lower cost and better liquidity.

Man Numeric have appointed John Lidington as co-portfolio manager of its liquid private equity strategy alongside existing portfolio manager Charles Liu.

Liquid private equity may sound like a contradiction in terms. However, Man Numeric invests in small, listed companies that mimic the profile of a typical private equity portfolio.

Therefore, the strategy seeks to generate returns (and carry risk) similar to that of a buyout fund. However, the investor gains from vastly better liquidity and much lower costs.

Liquid alternatives are increasingly popular

“Market interest in liquid private equity alternatives is growing,” said Shanta Puchtler, CEO of Man Numeric.  “We believe this type of strategy can benefit institutions of all sizes as a cash management tool within their broader private equity allocations.”

John Lidington said it was exciting to observe the strategy since its inception. He looked forward to providing clients with “similar return profiles and risk exposures as traditional buyout funds but without the long lock-up periods.”

Man’s Investment Thesis

Shortly after the launch of the strategy in May 2018, John Lidington and Gregory Bond wrote a blog titled “Private Equity Goes Public.”

They said the three structural limitations of traditional private equity are higher fees, illiquidity, and limited transparency.

However, liquid private equity features can resolve these limitations. These are:

• Lower management fees and no performance fees
• No lock-up periods
• Usually a rules-based investment process and a daily valuation of the portfolio

The strategy should ideally “avoid large-cap stocks and marry 1) top-down industry tilts that match PE’s industry exposures with 2) bottom-up proxies for buyout managers’ methods of identifying potentially undervalued companies and unlocking that value through growing revenues, improving operations, and various other means,” they wrote.

[Related Story: Schroders Launches A Private Equity Fund On Its GAIA II Liquid Alternatives Platform]