Advisers not tuned into threat

With swathes of private equity funds of funds on the verge of going bust, wealth managers seem oblivious to the crisis, reports Roxane McMeeken. Wealth managers appear to be dangerously unaware that the private equity funds of funds market has reached crisis point. New research suggests that the exponential growth of the private equity funds of funds market cannot continue. Private equity research firm Alt Assets has warned that the industry has passed its peak and is now on the brink of a major consolidation. There is a real possibility that swathes of private equity funds of funds are about to go bust, according to Chris Davidson, head of research at Alt Assets. A poll of wealth managers revealed that none were tuned into this threat. Emmanuel Fievet, head of investment counselling, Europe, Citigroup Private Bank, said the bank “views a diversified private equity fund of funds as a core holding” within client portfolios. Credit Suisse spokeswoman Renate Maurer said that when a private client portfolio is designed with an allocation to private equity, funds of funds are viewed as the “most suitable” investment route. She said the private bank was aware of no problems with private equity funds of funds other than the standard “lack of liquidity, little transparency and complex reporting”. She did stress, however, that Credit Suisse is “not active in recommending private equity. The reason is not poor performance, private equity would indeed be very good for portfolio performance, but rather legal constraints and lack of liquidity.” Andrew Bell, head of research and strategy at London’s Carr Sheppards Crosthwaite, sees private equity funds of funds as “a diversified way of playing an attractive asset category”. He added funds of funds offered by “Pantheon, Schroder Ventures and the like” were “held quite widely throughout some of our portfolios”.

Davidson: ‘industry has passed its peak’