The move into private markets is an example of a trend that has been driven by desire for the illiquidity premium they offer. Some of this movement can be traced back to quantitative easing - aka central bank money printing - and how this has made certain asset classes relatively more alluring. How long can this shift last?
Tech tycoon Michael Dell is moving from public to private markets, as his $16 billion family office winds down some stock-picking strategies, the Wall Street Journal reported late last week.
Dell’s MSD Capital is making the kind of change that this publication has noted for some time: family offices and other wealth managers switching into private equity and other relatively illiquid assets where they think it is easier to earn returns.
Dell Technologies’ founder will continue to have significant exposure to the stock market through passive investments and his Dell holdings, the WSJ reported. The $16 billion figure does not include the billionaire’s Dell holdings.
The report noted that MSD co-founder Glenn Fuhrman, is retiring from the firm at the end of December after nearly 22 years and plans to start his own family office. Sources said that Fuhrman wanted to spend more time with his family, including his three young children, and on philanthropy. MSD’s other co-founder, John Phelan, based in Palm Beach, Florida, will continue running the firm.
The WSJ said that a Bain & Co review in 2017 of MSD showed that the family office’s strengths were in private markets.
The move into private capital by family offices and other wealth managers has been driven by a desire for yield against a backdrop of ultra-low interest rates. High valuations for listed equities have squeezed yields. There is an estimated $2.0 trillion-plus of "dry powder", or committed capital, in private equity alone, raising some concerns that the sector is getting crowded.