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Pension plans problems: Shift towards private assets, searching for yield…

- - - - How it works, the track and the drivers of performance:
        
        allocation tilt toward alternatives, especially private assets
        
        long term investment horizon
        
        the use of leverage
        
        size of the funds is crucial
      - Controversy:
        
        no suitable measure for risk and returns for private assets results in controversial findings with respect to access returns (problem of comparing apples with pears)
        
        volatility is not an appropriate concept for private assets
        
        scarce data in combination with unfit performance measures results in controversial findings and confusion
        
        problems with mark-to-market valuation
      - Consistent findings across the academic literature and industry reports, i.e. what counts:
        
        management skills and access to top managers who have superior due diligence
        
        size of the fund
        
        the investment horizon
        
        Using a comprehensive survey, we show that investors with a larger capital allocation to private equity are more specialized − measured by the degree to which the investor focuses on private equity rather than other classes of investments − and have a wider scope of due diligence and investment activities. Other investor characteristics (experience, type, location, compensation structure, number of funds under management) play no role. In particular, endowments are not special according to the survey measures. These results are consistent with the changing LP–GP relationship in private equity as capital is increasingly concentrated in the hands of large investors.
- - - - Private equity has traditionally been thought to provide diversification benefits. How-ever, these benefits may be lower than anticipated as we find that private equitysuffers from significant exposure to the same liquidity risk factor as public equity andother alternative asset classes. The unconditional liquidity risk premium is about3% annually and, in a four-factor model, the inclusion of this liquidity risk premiumreduces alpha to zero. In addition, we provide evidence that the link between privateequity returns and overall market liquidity occurs via a funding liquidity channel. (JF Private Equity Performance and Liquidity Risk)
    - - We study the relations between management contract terms and performance in private equity using new data for 837 funds from 1984–2010. We find no evidence that higher fees or lower managerial ownership are associated with lower net-of-fee performance. Nevertheless, compensation rises and shifts to performance-insensitive components during fundraising booms. Further, the behavior of distributions around contractual fee triggers is consistent with an underlying agency conflict between investors and fund managers. Our evidence suggests that managers with higher fees deliver higher gross performance, and highlights that agency costs are an inevitable consequence of the information frictions endemic to agency relationships.
        (RFS Do Private Equity Fund Managers Earn Their Fees? Compensation, Ownership, and Cash Flow Performance)
    - - Private equity funds hold assets that are hard to value. Managers have incentives to distort reported valuations if these reports are used by investors to decide on commitments to subsequent funds. Using a large dataset of buyout and venture funds, we test for the presence of return manipulations. We find that some underperforming managers inflate reported returns during fundraising. However, those managers are less likely to raise a next fund, suggesting that investors can see through the manipulation. In contrast, top-performing funds appear to understate valuations. A simple theoretical framework rationalizes our empirical results as well as those of related papers.
        (JFE)
  - - - Aktionariat in Switzerland for retail investors allows to invest in private Swiss companies directly using blockchain technology based on Ethereum: "We provide Swiss companies with digital tools to create a market for their shares on their website."
      - Titanbay is a platform for institutional investors: "Titanbay is the preferred private markets investment platform for sophisticated investors, private banks and asset managers."
        
        The company was created to enable small to medium sized institutional investors and professional private investors to have the same level of access as the most established investors.
      - Moonfare platform allows individual investors to invest in PE following a simple procedure: "Moonfare is on a mission to find and vet the best opportunities in private markets and make them available to individual investors digitally."
      - US-based iCapital Network is the biggest platform helping individual investors gain access to alternative assets. The group has $65bn assets in total, with $8bn of that coming from investors based outside of the US.
      - Xen Capital in Asia: a platform for wealth advisors and asset managers: "We offer wealth advisors and asset managers a transparent alternative investment marketplace, enabling you to close deals anytime, anywhere, more efficiently."
      - LIQID in Germany: LIQID is a Berlin-based digital wealth manager focused on affluent private clients. For a fraction of the traditional minimum investment, it offers its clients digital access to investment strategies and opportunities previously available only to high-net-worth and institutional investors.