Hi Partner 👋
Today it’s time for a new position switch.
We are positioning Our Portfolio for great returns going forward.
The expected return of Our Portfolio right now? 17.1% per year.
We expect the Free Cash Flow of Our Portfolio to evolve as follows:
Including extra additions to Our Portfolio, it looks even better:
As Warren Buffett said:
Some exposure to Private Equity
I think it’s interesting for every investor to have some exposure to Private Equity.
Private Equity?
This basically means you invest in non-listed companies.
For private investors like you and me, it’s harder to buy these kind of companies.
But it’s interesting as they have a higher return than stocks in general:
Over the long run, US private equity has returned roughly 12–14% a year after fees.
That’s higher than the average return of stocks.
I wouldn’t consider investing directly in Private Equity within my circle of competence.
That’s why it’s important to surround yourself with competent people with high integrity.
The good news is you can invest in amazing Private Equity companies on the stock market.
What’s also important to understand?
By investing in a Private Equity firm, you maximally benefit from the power of compounding.
Let’s say:
A PE firm has $1 billion in Assets Under Management (AUM)
The unlisted equities return 10% per year on average
They collect 1% in yearly fees
In this example, you collect $10 million in fees in year 1.
However, in year 10, the PE firm will have approximately $2.6 billion in AUM.
This means they will collect $26 million in yearly fees.
So these kind of companies already win big thanks to the power of compounding.
If you combine this with extra inflows from clients, the AUM Private Equity companies manage increases even more.
As a result, Private Equity companies that get net inflows will by definition outperform Private Equity itself.
Two companies
Currently, we own two companies in the Private Equity space:
