Kensington Private Equity

The terms "private equity" and "accredited investor" are not appropriate for someone near retirement unless they only make a small portion of the overall portfolio

These terms imply high risk while someone near retirement should be low to mid risk.

If you can be more specific about their current portfolio and exactly which investments they would like to switch to I can offer more detail.

akaManny wrote: ↑ The financial advisor of a friend of mine suggested Kensington Private Equity as an investment appropriate for a person approaching retirement. Note that this was not the only suggestion, but does anyone have experience with this investment? What makes it special?

Did some quick analysis on their performance: https://www.kcpl.ca/kpef-performance/

They have averaged 11.60% per year from 2010 to 2020.
TDB902 (TD e-series index fund for US Equities) has provided a 15.96% annual return per year for the same time period.

They are incorrectly comparing their fund results to S&P/TSX composite to showcase that they're beating the index, but that's NOT what they invest in. They're using the wrong benchmark.

This leads me to one of two conclusions:
1) If they don't even know which benchmark to use, how can I trust them with my money?
2) If they do know which benchmark to use but still chose the wrong one, they are crooks and I wouldn't want to invest my money with them.

For someone wanting advice, they should go for a financial planner that is fee-only, not fee-based. They charge perhaps $2K per year (tax deducted on the non-reg portion) and will provide way more valuable advice than any financial advisor.

Good luck.

TuxedoBlack wrote: ↑ They are incorrectly comparing their fund results to S&P/TSX composite to showcase that they're beating the index, but that's NOT what they invest in. They're using the wrong benchmark.

This leads me to one of two conclusions:
1) If they don't even know which benchmark to use, how can I trust them with my money?
2) If they do know which benchmark to use but still chose the wrong one, they are crooks and I wouldn't want to invest my money with them.

Why do you think they are using the wrong benchmark? 38% of their assets are in USD, so perhaps they should use a blended benchmark, but using 100% SP500 or other US large cap index is not appropriate.

akaManny wrote: ↑ The financial advisor of a friend of mine suggested Kensington Private Equity as an investment appropriate for a person approaching retirement. Note that this was not the only suggestion, but does anyone have experience with this investment? What makes it special?

please don't touch it.

as for the so called financial advisor friend - ask them what commission they get.

what other products did he/she suggest?

at your age you need 99% safe something that pays 5%+, 1% risk (casino money)

what return rate are you looking for & what risk level will you accept?

kelaaa wrote: ↑ Why do you think they are using the wrong benchmark? 38% of their assets are in USD, so perhaps they should use a blended benchmark, but using 100% SP500 or other US large cap index is not appropriate.

Their website is very convoluted in that they don't tell you where/how they're investing.

It only says it's a hybrid and that could be 50/50 or 90/10 in the US.

How do you know which companies they're investing in?

From what I can gather, they invest heavily in the US (90%, as the US market is 10 times bigger than the Canadian market) yet they used TSX as a benchmark. Very, very misleading at the very least and downright crook behaviour at worst.

Do you know what the red flag is? No where does it say what the cost is for the fund. That, to me, is a sure sign that this is over-priced.

The last point I'll add: even IF they have beaten the market over the last 10 years, it does not guarantee that they will outperform a simple low-cost index over the next 10 years.

I wouldn't bet on them outperforming or beating the market consistently.

TuxedoBlack wrote: ↑ Their website is very convoluted in that they don't tell you where/how they're investing.

It only says it's a hybrid and that could be 50/50 or 90/10 in the US.

How do you know which companies they're investing in?

From what I can gather, they invest heavily in the US (90%, as the US market is 10 times bigger than the Canadian market) yet they used TSX as a benchmark. Very, very misleading at the very least and downright crook behaviour at worst.

Do you know what the red flag is? No where does it say what the cost is for the fund. That, to me, is a sure sign that this is over-priced.

The last point I'll add: even IF they have beaten the market over the last 10 years, it does not guarantee that they will outperform a simple low-cost index over the next 10 years.

I wouldn't bet on them outperforming or beating the market consistently.

Please don't infer I'm recommending them, but they clearly list the logos of some of their current and past holdings at the bottom of this page: https://www.kcpl.ca/private-equity/ I don't recognize any of them, but that is not a mark on their transparency.

The Kensington Private Equity Fund has "Reporting" links. If you look at the annual report, you'll see that only 38% of the assets are in USD. Their "fact sheet" https://www.kcpl.ca/wp-content/uploads/ ... e-2021.pdf says 68% in Canada, 29% in US in terms geographical spread. So by no means US-centric.

Fees are stated in the PDF. Four types of fees: MER, Trailer Fees, Performance Fees, and Redemption Fees.

against my benchmark Blackrock BLK common shares, the Kensington private equity fund gets a 'D'

https://www.kcpl.ca/kpef-performance/

A $10,000 investment in Kensington December 2009 growth to June 30, 2021 $38,439, that's 11.5 years

comparing Kensington to BLK that has zero MER, loads or performance fees

https://seekingalpha.com/symbol/BLK

https://fintel.io/i/blackrock

$10,000 invested 10 years ago would be ~$62,000 today

https://www.stocksplithistory.com/blackrock/

I would guess for people who are interested in these things it is not really about the CAGR. I'd imagine it is about diversification, low beta (low correlation with TSX composite), and exclusivity. I don't suppose Questrade or TDDI ever invited you to an annual dinner at a yacht club, where you met other old money millionaires and talked about Jackson Hole versus Park City versus Lake Tahoe? Where when you see your advisor driving a new Porsche 911 you don't say, "Hey, that's my money!", but rather "Hmmm, can't yet swing a Maybach, poor lad."

kelaaa wrote: ↑ Please don't infer I'm recommending them, but they clearly list the logos of some of their current and past holdings at the bottom of this page: https://www.kcpl.ca/private-equity/ I don't recognize any of them, but that is not a mark on their transparency.

The Kensington Private Equity Fund has "Reporting" links. If you look at the annual report, you'll see that only 38% of the assets are in USD. Their "fact sheet" https://www.kcpl.ca/wp-content/uploads/ ... e-2021.pdf says 68% in Canada, 29% in US in terms geographical spread. So by no means US-centric.

Fees are stated in the PDF. Four types of fees: MER, Trailer Fees, Performance Fees, and Redemption Fees.

“Performance Fees”? They skim an additional 10% off distributions? Different name on the letterhead, same leeches as everywhere else.

kelaaa wrote: ↑ I would guess for people who are interested in these things it is not really about the CAGR.

I'd imagine it is about diversification, low beta (low correlation with TSX composite), and exclusivity.

^^^ agree to a point, depending on the individual at the stage in their life they're at what they invest in, which can change several times between age 21 to retirement.

at the wealth building stage its about growth + DGI.

in retirement its about preserving ones capital assets with ongoing income from them at the best possible yield, minimum tax.

on "diversification" .... individual to individual - from 10, 20, 30 different positions, others may have several ETF's, then there is those that just have 2 or 3 holdings in their portfolio (choice from) ... income producing stocks/ETF's, mutual funds, GIC, HISA, an annuity or maybe a reverse mortgage - again depending on what stage of life they're at.

Janus2faced wrote: ↑ ^^^ agree to a point, which depends on the individual at the stage in their life they're at what they invest in, which can change several times between age 21 to retirement.

at the wealth building stage its about growth with for some DGI.

in retirement its about preserving ones capital assets with ongoing income from them at the best possible yield, minimum tax.

on "diversification" .... individual to individual - from 10, 20, 30 different positions, others may have several ETF's, then there is those that have 2 or 3.

The world is bigger than publicly traded equities. That is the whole point of private equity. Take the CPPIB for instance, where publicly traded equities only make up about 29.2% of its portfolio. Private equity is 26.7%. Real estate and real assets 21%. Now does this make financial sense? I don't know, but most of the 2000 people at the CPPIB would put themselves out of a job otherwise, so they'd most likely say it makes sense. Certainly some institutions have moved toward the simplification direction as ones hears some university endowment boards give up their high expense investments (I don't know if these were just hedge funds / active funds, or included private equity and real estate) for low cost broad indexes.

I'd offer an imperfect analogy as to invest in a REIT. There is management team in place that selects investments, pay themselves salaries and bonuses, etc. The difference is that with the REIT you have higher reporting standards and you can trade it on an exchange.

Kensington is a good mid-market privates equity firm. Having some exposure to private equity as part of a well balanced portfolio can make sense. Please note the risk and returns are higher for this asset class vs public equities because private equity puts more debt/financial leverage on their stable, cash flow positive investments. Higher leverage means higher returns and risk. However, it is not as risky as venture capital, as most of these investments will have negative cash flow