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InvestWELL Report |
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Question:
What is the fastest growing investment segment?
Answer:
Private equity - as many institutional investors are gradually diversifying away from the traditional asset classes (i.e. stocks, bonds and cash) and moving to alternative assets.
What is private equity?
Private equity, unlike public equity, is held privately and not traded on the public stock exchanges. In comparison with public equity, private equity is less liquid, subject to much less scrutiny by authorities, and offers about a 3 - 7% higher return per year. Currently, the growth of private equity, especially in emerging markets, is nothing short of phenomenal.
N.B. The alternative asset class is comprised of the following 4 segments:
hedge funds, real estate, commodities and private equity.
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(Cumulative %)
Investment Strategy – MEMBER SECTION
InvestWELL Picks has managed to hold its gains vis-à-vis the index (as defined by S&P 500 index. ) Over the last month, InvestWELL Picks has been less volatile than the general market.
Chart 1.
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- During the last month, the US equity market has bounced back from the previous lows (Chart 2 & 3). The market has been rallying from a very oversold condition. Recently, U.S. stocks posted their steepest two-week advance since September after President George W. Bush announced a plan to freeze some mortgage rates to prevent foreclosures from causing a recession.
Charts courtesy of StockCharts.com
- During the last month, the Canadian market has pretty much mirrored the performance of its US counterpart (Charts 2 & 3).
Charts courtesy of StockCharts.com
- Last month, the US economy gained 94K jobs while the unemployment rate declined to 4.6%. There is growing talk amongst economists whether the US economy will be able to avoid recession.
- Last month, the Canadian economy added 43K new jobs while the unemployment rate moved up to 5.9%, as more people entered the labour force. So far this year, employment has increased 2.3% (+388,000), stronger than the 1.8% increase seen over the same period in 2006.
- If you're wondering why you've stopped getting zero interest credit card transfer offers in the mail, consider the possibility that your bank is reassessing its future financials, given the spread of sub-prime mortgages into the "creditworthy" sphere of financing. Although banks aren't talking about it much, the sub-prime crisis seems to deliver a new little pellet of worry on a daily basis, and it has seeped into every corner of the business.
- China ordered banks to increase reserves by the most in four years to try to prevent the world's fastest-growing major economy from overheating. China's surging exports are pumping cash into the financial system, fueling inflation and increasing concerns that the economy will overheat.
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(see
explanation)
Here is a direct quote from the Behavioral Section in last month's Member newsletter:
"Overall, the market's technical picture is somewhat weak. We continue to believe the market will be unable to go up in the next few weeks" Our prediction was quite correct as the market was not able to advance.
Charts 6 - 8: Advancing/Declining Line, AAII and Equity Put/Call Ratio
Charts courtesy of StockCharts.com
and DecisionPoint.com
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D is correct.
Private equity is rather illiquid since it cannot be quickly sold on the stock market. In some forms of private equity (e.g., venture capital) investors have to wait more than seven years before being able to liquidate the position.
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Thank you for reading InvestWELL Report. This is a non-member version of InvestWELL Report.
Please sign up for our membership to receive the member version of the InvestWELL Report.
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