Fidelity adds private equity to its alternatives suite
Offerings from iCapital, CAIS and Goldman Sachs now available.
Fidelity Investments is adding private-equity funds to its adviser platform, via deals with iCapital Network, CAIS and Goldman Sachs.
The private-equity funds will be part of Fidelity’s Alternative Investments Network, which the Boston-based behemoth started in 2013. The private-equity offerings are “a natural evolution of that platform,” says Gary Gallagher, senior vice president at Fidelity Institutional.
Total private-equity capital hit an all-time high of $4.2 trillion in June, Fidelity says. As private-equity investing has grown, advisers have been increasingly interested private equity for their clients. “We’ve been thinking about what advisers need in private equity and how to create basic access tools to help them,” Mr. Gallagher said.
Most of the private-equity funds will have $100,000 minimum investment requirements, Mr. Gallagher said. Fidelity will also offer third-party research on the funds. The offerings are the first comprehensive suite of services for investment advisers looking for private-equity funds, he said.
The funds range from single-manager to multi-manager, as well as “vintage-year” private equity. Vintage-year refers to the first year a fund establishes a primary investment into a structure of private-equity holdings. The funds typically add to their portfolios over subsequent years. Most private-equity funds are structured as limited partnerships: Fees and redemption periods vary by fund.
Private-equity investments can offer enormous returns, even if the company doesn’t go public. They also offer the possibility of utter failure and bankruptcy. A typical private-equity company buys established companies that need reorganization, capital or expertise, and tries to turn them around, often at enormous profit. Bain Capital, where 2012 Republican presidential hopeful Mitt Romney made his fortune, is one example of a private-equity firm.
Private equity shouldn’t be confused with venture capital. While both often seek to cash in when a company goes public, the difference largely ends there. Venture capital companies tend to buy small slices of unproven, startup companies hit it big.
These red-hot tech companies are often called “unicorns,” because they are so rare. (Think Dropbox, Facebook, Snapchat).
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