In Part 2 of Brian Haskin’s interview with Keith Black, Managing Director of Exams and Curriculum for the CAIA Association, Mr. Black explains why private equity and venture capital are difficult to implement under the ’40 Act structure. For starters, the ’40 Act requires that no more than 15% of a fund’s assets are invested in illiquid securities. Retail mutual funds also require daily liquidity and publication of a daily net-asset value; two more things that are difficult for private equity and venture capital.
However, Mr. Black does offer two possibilities for gaining private equity exposure without investing in private limited partnerships:
- Closed-end funds, which acquire more “permanent” capital via IPO can straddle the ’40 Act’s liquidity requirements, and more such funds pursuing less-liquid strategies may be in store: and
- Investors can buy the shares of publicly traded private-equity firms such as Blackstone, Carlyle, and KKR.
In the second half of the video, Mr. Black offers his thoughts on commodities, which he considers to be “on sale right now,” at least relative to where their prices were just six or twelve months ago. But Mr. Black distinguishes sharply between commodity stocks and commodity futures, since the former is normally included within equity exposures. “Equities are a leading indicator, while commodities are a coincident indicator,” according to Mr. Black. He also believes commodities will outperform during a Fed tightening cycle.
Click here for Part I or Part III of this video series. For a list of all the exclusive DailyAlts videos, click here.