Sunday, February 27, 2011

Private Equity Funding

A Straits Times article again highlighting the allure of private equity. They enticed you with phrases like "Though not easily accessible to the average investor, such funds outperform public equities" . Hmm...where have I heard that before.. it seems to be transplantable to Hedge Funds.

If you want to do private equity, don't need to approach private equity fund via private banks or specialised private equity fund manager. This is like hedge funds. They promised you the skies but ultimately, it benefits them more than you after the fees. I'm sure only the institutional investors and family offices will get more out of private equity via those managers than normal hnws. This is just my view since I have not personally experienced investing in a private equity fund of institutional size.

For example, if you have $500k to spare, why not invest $100k into 5 different local companies of your liking. You could have spoken to a private owner of a ID shop and his business model and management gives you confidence, approach him and ask him whether he is interested in letting in a sleeping partner or an active partner.

How about some assistant chef you know who can cooked very well and you get to know during your meetup with him his intention to start a hawker stall ? Why not be his partner for $100k.

You will be assuming the same risk and illiquidity as the private equity fund but the upside is you are personally involved with the party you are funding.

Even better, how about becoming a private equity fund? Set up a small pte ltd company with like-minded investors. Assuming 5 investors pooled $200k each into the pte ltd company, you could have your diversify your risks again by putting up less upfront (200k each instead of $500k) while increasing your companies invested to 10 ($100k each).

Just my thoughts... I would do that. So any business out there who needs micro-funding? Or how about like-minded investors who want to involve in micro-funding? :)

How to get Rich in Investments?

How to get rich? Read on and see my own conclusion at the end.

Here's Jim Roger's Investment nuggets and this is what he has to say...
On getting Rich

“Historically, you buy stocks when they're yielding 6% and selling at eight times earnings. You sell them when they're at 22 times earnings and yielding 2%”
"Take your money; put it in Treasury bills or a money-market fund. Just sit back, go to the beach, go to the movies, play checkers, do whatever you want to. Then something will come along where you know its right. Take all your money out of the money-market fund, put it in whatever it happens to be and stay with it for three or four or five or 10 years, whatever it is.
You'll know when to sell again, because you'll know more about it than anybody else. Take your money out, put it back in the money-market fund, and wait for the next thing to come along. When it does, you'll make a whole lot of money."

 This is what Buffett did to this Personal Account (not Berkshire) as reflected in his 2008 New York Times op-ed article "Buy America, I am" :

“A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful. And most certainly, fear is now widespread, gripping even seasoned investors." 

Mr. Buffett indicated that his personal account, which had been invested entirely in government bonds, would soon be 100 percent in United States equities if prices continued to become more attractive. He clearly stated that there was no way to predict where stocks would be in a month or a year but that prices would recover substantially well before widespread positive sentiment returned. As it turns out, it is a good thing his goal was not to predict the short term direction of the market because he was several months too early in terms of identifying the market bottom which finally arrived in March 2009.
 A popular Hong Kong Investor , 曹仁超, made his millions (est. worth of USD$40mil if I'm not wrong) thru' cycling between assets. I don't know much of the exact details but he moved from HK stocks to real estate(in UK) to HK stocks to real estate(in HK) to Gold to HK stocks to probably China stocks now. You can read about his story here : 从穷困潦倒到亿万富翁 曹仁超演绎股市传奇. To me, he is a trend investor and his timing seems impeccable.

How about some local fare like Mr Isaac Chin's gutsy moves? Read the NextInsight article here. I will summarize what I see (but probably you might not agree with what i see.. ).

"I think the most important thing about investment is timing. I could sense the financial storm coming in 2008/9  and I had employed the ‘withdrawal’ technique (instead of the price-averaging down) to fight the crashing market. When STI hit 1457 in March 2009, I used all my available ammunition to bet on the 4 Reits and the rest was history. "

A one-hit wonder? How about considering he first jackpot (and thus started his career as private investor) was selling off his condo(real estate) at $1.2mil in 2000. He subsequently put his money into Bonds, Real estates(Big jackpot here I believe) and bonds and finally the 2009 Jackpot of $2mil gain in Reits. He is now waiting for his thesis of STI powering another 15% before re-allocating his cash into Bonds again.

Most of them seemed to have move the bulk of their resource($$$) into overweighting an asset class deemed undervalued and moving out subsequently to other asset classes like real estate, bonds and the ultimate safe haven of the "Cash and Alternatives" Asset class subsequently. Thus, asset allocation is very important in a person's investing journey. You don't have to move 100% into one asset class at one time, but you do need to maintain the weight-age of the asset class depending on your judgment call. For know nothing investor like me, I like to have "Cash & Alternatives" on hand and overweight where I see the most value. But if you are a know-something investor, probably concentration could better for you. No right or wrong.

Friday, February 4, 2011

Portfolio Update January 2011

2011 Year to date (YTD) Return
Portfolio 0.76%

Dividend/Interest for 2011   $16,609

Absolute Return Since 11/2007
Portfolio 12.48%

Egypt and the Arab countries "crisis" on display but no hit to the market. Rightfully so I might think as they do not dominate World GDP as much as China, USA, Japan or Europe. Market has been exceedingly bullish in my humble opinion. Every small dip is supported within a few days by huge positive buying. I believe market is efficient to the extent of discounting news that are already known. Only black swan or Recessions will cause human emotions to run amok making irrational behavior and thus, making market inefficient.

So, right now.. I can't think of anything that will derail the market. As usual.. Only the unknown unknowns will kill you, not the known unknowns.