Numeric Liquid PE Alternative
Man Numeric's Liquid Private Equity Alternative strategy aims to provide investors with an investment which performs in a similar manner to a private equity investment, but using publicly-traded stocks. We seek to identify public equities that most closely resemble the positive characteristics of the companies found in buyout fund portfolios, and avoid both the industries and types of companies which buyout funds typically deem to be unattractive.
Overall, the strategy seeks to generate a similar return profile, sector profile and risk exposures as the US private equity ('PE') buyout industry.
Approach
Liquid illiquid option for PE investors
- Lower cost, systematic PE alternative;
- Cash management tool for PE investors with cash that is not yet committed capital; and
- More appropriate PE benchmark than traditional public equity indices.
Investment Process
- Select public stock universe: Starts with a stock selection universe that is reflective of the small-medium size of companies generally found in buyout portfolios;
- Tilt to industries favoured by PE: Matches the industry exposures of private equity using live buyout deal data;
- Avoid “obvious” stocks: Applies a series of screens to eliminate stocks that the model feels do not display PE-like characteristics; and
- Builds portfolio bottom-up: Aims to construct a portfolio that is optimized using various risk controls and estimated transaction costs.
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