As passive investors, it pays to know what to expect from a high performing private equity firm. When placing your hard-earned capital into an investment opportunity, you are essentially trusting that the firm will manage the money and the asset well in order to achieve the desired results.
Not all investments or money managers are created equally. In today’s inflationary time, investors are chasing the same fixed number of real assets and driving up the prices to exorbitant numbers. The underwriting is becoming more aggressive and future cash flows are based on the projection of continued aggressive rent growth and future sell prices. All of this is happening at the expense of greater risk to the investment. No one knows what tomorrow’s market will look like. While sitting on the sidelines is likely not the right answer, good money managers do one thing first!
What All Good Money Managers Do
Warren Buffet’s famous #1 and #2 rules are the same: “Never Lose Money.” This principle is the foundational discipline for wise investors. Regardless of the market, the investment future potential and the many other variables, good investment firms invest with such conservatism and margin of safety on their investment that there is comfortable confidence that investor capital is covered and no principle is lost.
Of course, the unexpected can happen to even the most skilled investors. In this case, good managers will first ensure to protect investor capital and work to achieve targeted returns even if it means less for them.
As a passive investor, it is critical to know and trust those with whom you invest. Vetting the syndicator is highly necessary before placing any funds into their hands for your next investment. Get to know their experience, team and track record. Most importantly, ensure there is alignment of interest and that you have a great gauge on character, ethics and values. Find out more about Robinson Capital here.
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