Private investment management is necessary to secure investors’ holdings. Without it, private investments could become victims of fraud. Protecting privately-invested funds requires a dedicated approach, following best practices. Here are a couple of ways you can protect your private investments better.
1. Utilize an SPV
A special purpose vehicle is a particular type of business entity. Using them could help you shield yourself from liability, protecting your investments. An SPV also lets you designate who owns assets within a company. Sometimes, companies prefer holding stuff off their balance sheets. This can give them an advantage when it’s time to file taxes, letting them pay less. By using an SPV, you can put some of your investments under another entity’s name. Putting them in their name lets you avoid paying taxes on some investments. So, you’ll have a larger ROI at the end of the year.
You can also use them to pool funds with other investors. That can help you meet the minimum account size to qualify for certain investments. If you’re not able to put up all the funds yourself, pooling with other investors can bridge the gap. Using an SPV also makes it possible to specify which investments you’d like to target. Targeting them, in particular, can help maximize the return on your investment.
2. Diversify Your Asset Allocation
Everyone involved with finance understands the importance of diversifying their investments. Putting all your eggs into one basket could expose them to unnecessary risk. For example, let’s say you’ve got most of your assets in real estate. That’s normally a great asset class for long-term investments. However, there have been downturns in that sector.
If all your holdings are in one asset class, you’ll be more vulnerable to downturns. Economic stress could affect you worse than it would if you had a diversified portfolio. Often, when one asset class falls, another rises in tandem. Putting some of your investments into precious metals could hedge them during recessions.
3. Leveraged Buyouts
Leveraged buyouts make it possible to take over companies without significant funding. By taking over a company, you’ll have access to its revenue streams. Few investments return as much as a company’s revenue.
To use leveraged buyouts, you’ll need a relationship with a finance partner. They’ve got to provide you with all the capital needed to execute the buyout. That’s why they’re called leveraged buyouts. Most of the time, you’re able to use the company you’d like to buy as collateral. Using them as collateral simplifies the finance process. Your finance partner can use the company’s value to justify the loan’s approval. Since it’s being used to purchase a company, the company’s value is enough to approve the loan.
4. Comprehensive Oversight
Oversight is how investment funds monitor what’s happening to their funds. Usually, firms have a lot of different people working in them. Keeping an eye on everyone requires a lot of resources and technical expertise. Comprehensive oversight refers to actively managing the investments using multiple layers of security.
A high-quality oversight team will audit a fund’s investments. This helps to ensure they’re used properly. Otherwise, it’s almost impossible to know what’s happening to them in real-time. Hire a comprehensive oversight team if you’re worried about your fund’s performance. They’ll help protect it from fraud. And, they’ll ensure it’s compliant with all relevant regulations.
Using a comprehensive oversight team can improve an investment’s overall security. Their work can help lower the likelihood of fraud. At the end of the day, such practices usually help funds return more to their investors.
How to Manage Private Investments Securely
Securely managing private investments is something that takes time to learn. Start by researching all the best practices used in the industry. Putting assets into a special purpose vehicle could shield them from taxes. They can also lower their liability, as well. You should still use a comprehensive oversight team to ensure compliance with regulations. Combined, these approaches form the core of any firm’s asset protection strategy. Protecting a client’s assets is always a top priority for investment firms. That’s why you’ve got to learn all the industry’s best practices.
