Has anybody tried the private equity or private credit investments Wealthsimple offers? They advertise very strong returns but I don't know how this would fit in to a general index investing strategy.
I'd be exceptionally leery of going into that, I'd expect details explanations and want to actually understand the ideas behind investing...
Their website claims 4.75% higher return than the stock market over the last 20 years and 18% annualized returns. Some pretty bold claims to be making.
https://www.wealthsimple.com/en-ca/private-equity
I've read so much about how the worlds wealthiest people tend to be able to expand their capital at a faster rate than us normies, so it seems like a ticket into that world.
I have to admit I was intrigued and wondering if it wouldnt be a bad place for a portion of my portfolio.
Would love to see someone who has knowledge and experience in this world do a deep dive. They do have a long FAQ section on the website about this This podcast apparently goes into it a bit: https://thecanadianinvestorpodcast.com/podcast/the-canadian-investor/episode/is-private-equity-really-outperforming-index-funds
Apologies for being a non-Canadian investor commenting here, but I think investors in private equity and private credit are rather rare. I'm assuming 99.9% of posters don't invest in either of those categories, so maybe my meager 2-3 years of experience is helpful.
My private credit investment has been generating the income I expected, but it also includes an "equity kicker" that should boost returns at the end of the investment period. I know I'm being paid as I expected, but I won't know the total return until it ends.
Private equity can include many subcategories, like venture capital or distressed private equity. Venture capital has a very long time frame, and the return comes almost entirely from a few outperformers. It also illustrates a common feature of hedge funds and private equity - there's no market for those companies, until they're sold (or go IPO).
https://www.investopedia.com/ask/answers/040615/how-do-returns-private-equity-investments-compare-returns-other-types-investments.aspSome people must sell, despite the lack of a public market. One of my investments is in "venture capital secondaries", where those running the fund buy privately held shares at a discount. That discount, plus holding the shares until IPO, is how the investment profits. So far, one company has gone IPO, and I got paid from that.
The biggest risk with private equity is that institutional investors have already hired the best people, and the rest may be subpar. My investments have been with hedge funds that haven't established themselves enough to merit the attention of places like Yale Endowment. From researching, I think the funds I invest in are too small for institutional investors, which also helps me avoid competing with them.
