With tax season fast approaching, K‐1‐generating securities come up frequently in client discussions. It is timely, then, to review why we hold publicly‐traded private equity companies, a number of which are structured as LPs, in some of the portfolios. You might find some of the reasons surprising.
In the world of asset allocation, there are three varieties of publicly ‐traded private equity firms. The first are those that manage private equity funds and collect management and performance fees. The second class consists of firms that simply invest their own capital in private companies. The third class is comprised of firms that make debt and equity investments in private equity deals.
Examples of the first class of publicly ‐traded private equity firms include Kohlberg Kravis Roberts & Co. L.P. (NYSE:KKR), The Blackstone Group L.P. (NYSE:BX), and Oaktree Capital Group, LLC (NYSE:OAK). Examples of the second class are Wendel SA (MF FP), Exor SpA (EXO IM) and, to some extent, Reinet Investments SCA (REI SJ). Examples of the third class are American Capital, Ltd. (ACAS), Main Street Capital, Gladstone Capital Corp. (MAIN), and Prospect Capital Corp. (PSEC).
Continue reading here.