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The Rational Reminder Podcast
Episode 287: A Practical Look at Private Equity w/ Steve Balaban & Epic Life w/ Justin Breen
Jan 11, 2024
01:36:22
Steve Balaban, a private equity insider, discusses investing in private equity, benefits and drawbacks, due diligence, and how private equity interacts with investor psychology. The podcast also covers the science of motivation and goal setting, the power of networking, and key lessons from Justin Breen's book 'Epic Life'.
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Quick takeaways
- Investors should diversify their private equity investments across different vintage years to mitigate risk and improve returns.
- Liquid private equity provides more liquidity compared to traditional illiquid funds, but investors should consider trade-offs and conduct due diligence.
- Investors should approach private equity with a thorough understanding of their portfolio objectives and work with wealth managers to navigate psychological factors.
- Liquid private equity vehicles make private equity more accessible to retail investors, but careful evaluation and due diligence are necessary.
Deep dives
The Importance of Diversifying Vintage Years
Investors should diversify their private equity investments across different vintage years to mitigate the risk of overexposure to a specific time period. By spreading investments over multiple years, investors can reduce the impact of market downturns or economic crises that may disproportionately affect a particular vintage year. This strategy allows for more balanced returns and decreases the reliance on the performance of a single vintage year.
Understanding the Trade-offs of Liquid Private Equity
Liquid private equity offers investors access to private assets through vehicles that provide more liquidity compared to traditional illiquid private equity funds. These vehicles, such as third-party evergreen funds or open-ended first-party funds, strive to enhance liquidity by incorporating features like redemption opportunities and cash sleeves. However, investors may need to consider the trade-off between liquidity and access to top-performing funds. It is crucial to conduct thorough due diligence and evaluate the fees, investment strategies, and diversification opportunities provided by different liquid private equity options to make informed investment decisions.
The Psychology of Investing in Private Equity
Private equity investments can be attractive to investors due to their potential for outperformance and fear of missing out on higher returns. However, it is essential for investors to approach private equity with a thorough understanding of their overall portfolio objectives and risks. Emotional reactions to industry sales pitches and performance numbers should be tempered with a comprehensive analysis of how private equity fits into an investor's specific portfolio constraints and goals. Working with a trusted wealth manager or advisor can help investors navigate the psychological factors associated with investing in private equity.
Liquid Private Equity as an Accessible Option
Liquid private equity vehicles have emerged as a way to provide retail investors with access to private assets that were traditionally accessible mostly to institutional investors. These vehicles allow investors to invest smaller sums of money compared to illiquid private equity funds, making private equity more accessible to a broader range of investors. However, retail investors should carefully evaluate the investment options available and conduct due diligence on the different liquid private equity providers to ensure alignment with their investment goals and risk tolerance.
The Power of Naming Your Year
Naming your year can be transformational, focusing your entire year on one word or one phrase allows you to manifest your goals and purpose. It helps you stay aligned with your purpose and prioritize what truly matters in your life. By consistently reminding yourself of your chosen word or phrase, you can make decisions and take actions that align with your intentions.
The Importance of Developing Networking Skills
Networking is not just a skill, but a purpose in itself. Some individuals are naturally inclined to connect with others and build networks. By acknowledging this gift and consciously investing time and effort in networking, you can open doors to opportunities and connections that can help you achieve your goals. Networking allows you to connect with like-minded individuals, share ideas, and collaborate on projects that align with your purpose.
The Value of Actionable Ideas
Ideas alone are meaningless without action and investment. It is crucial to take action on ideas and turn them into actionable steps that align with your goals. Ideas that are acted upon and cultivated with consistent effort can become habits and rituals that contribute to personal and professional growth. Emphasizing execution and taking meaningful action on ideas is essential for achieving success and making progress towards your goals.
Balancing Free Time and Achievement
Free time is important for achieving a sense of balance and well-being in life. Making time for leisure activities, relaxation, and spending quality time with loved ones is crucial for personal growth and overall happiness. Striking a balance between achievement and free time allows you to recharge, reflect, and rejuvenate, leading to increased productivity and fulfillment in all areas of life.
12.
Upcoming Experts in Retirement Thinking and Discussion on Scott Cedarburg Episode
2min
It’s the start of a new year and with it comes an opportunity to re-evaluate your trajectory and set your goals for the months to come, whether they be financial, personal, or all of the above. Kicking things off for today’s episode is our conversation with Steve Balaban, a private equity insider with a refreshingly realistic and practical perspective on private equity. We talk with Steve about investing in private equity, the benefits and drawbacks every investor should know about, why due diligence is essential, how private equity interacts with investor psychology, and much more. Tuning in you’ll also learn about the Private Equity Certificate offered by CFA Society Toronto in collaboration with Mink Learning and how listeners can gain special access to these training tools. Next, we take a look back at our conversation with Ayelet Fishbach from the Booth School of Business on the science of motivation and goal setting and the contents of her new TEDxChicago Talk The Science of Getting Motivated. We wrap things up with a review of Justin Breen’s book titled, Epic Life: How to Build Collaborative Global Companies While Putting Your Loved Ones First, followed by our conversation with the author on the transformational power of naming your year, the power of networking, and other key lessons from his book. For all this and much more, be sure to tune in and start 2024 armed with insights from some of the best thinkers around!
Key Points From This Episode:
(0:01:26) Use discount code RATIONAL to watch the award-winning documentary Tune Out The Noise, free of charge (valid until the end of January 2024, so make sure you don’t miss out!)
(0:03:44) An introduction to Steve Balaban and Mink Learning, a private equity education company he founded in 2019.
(0:07:29) Steve’s insights on aggregate public market equivalent (PME) benchmarking and key issues that arise when using Internal Rate of Return (IRR) to benchmark private equity.
(0:17:58) The best arguments in favour of private equity, the downsides you need to know about, and a rundown of the fees involved.
(0:23:38) Top reasons Steve has come across for why people want to invest in private equity, and what he considers to be the right reasons.
(0:29:38) How private equity interacts with investor psychology and the importance of having different vintages in your portfolio.
(0:35:15) Why private equity is typically illiquid, how liquid private equity works, and the tradeoffs for investors with liquid private equity as opposed to more direct illiquid approaches.
(0:42:59) The differences between private and public equity; advice on how investors should interpret private equity marketing materials and the importance of doing due diligence.
(0:51:59) Trends in the industry towards permanent equity, rather than rolling over every few years.
(0:59:55) Details on the Private Equity Certificate offered by CFA Society Toronto in collaboration with Mink Learning and how to use the discount code RationalReminderPEC.
(01:02:21) A look back at our conversation with Professor Ayelet Fishbach and her newly released TEDxChicago Talk The Science of Getting Motivated.
(01:03:58) Our book review of Epic Life: How to Build Collaborative Global Companies While Putting Your Loved Ones First, and our conversation with the author, Justin Breen.
(01:07:12) The transformational impact of naming your year, finding your purpose, and the power of networking.
(01:25:47) An update on our new podcast Money Scope, the content you can expect from it, and its success on the Canadian Apple Podcast charts.
(01:28:43) What we’ve been experiencing on LinkedIn, book recommendations for the start of 2024, and exciting upcoming guests!
Links From Today’s Episode:
Rational Reminder on iTunes — https://itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582. Rational Reminder Website — https://rationalreminder.ca/
Rational Reminder on Instagram — https://www.instagram.com/rationalreminder/
Rational Reminder on X — https://twitter.com/RationalRemind
Rational Reminder on YouTube — https://www.youtube.com/channel/
Rational Reminder Email — info@rationalreminder.ca Benjamin Felix — https://www.pwlcapital.com/author/benjamin-felix/
Benjamin on X — https://twitter.com/benjaminwfelix
Benjamin on LinkedIn — https://www.linkedin.com/in/benjaminwfelix/
Cameron Passmore — https://www.pwlcapital.com/profile/cameron-passmore/
Cameron on X — https://twitter.com/CameronPassmore
Cameron on LinkedIn — https://www.linkedin.com/in/cameronpassmore/
Tune Out The Noise — https://film.dimensional.com/podcast/login?redirect=%2Fpodcast
Discount Code for Tune Out The Noise — RATIONAL
Steve Balaban — https://www.stevebalaban.com/
Steve Balaban on LinkedIn — https://training.minklearning.com/
Mink Learning — https://training.minklearning.com/
Private Equity Certificate offered by CFA Society Toronto in collaboration with Mink Learning — https://web.cvent.com/event/10af7f03-e05c-465a-803e-3e8ac3864120/summary
Discount Code for Private Equity Certificate — RationalReminderPEC
Justin Breen on LinkedIn — https://www.linkedin.com/in/justinbreen1/
BrEpic Communications LLC — https://www.brepicllc.com/
BrEpic Network — https://brepicnetwork.org/
Episode 188: Prof. Ayelet Fishbach — https://rationalreminder.ca/podcast/188
Professor Ayelet Fishbach's TEDxChicago Talk, The Science of Getting Motivated — https://www.youtube.com/watch?v=T8CegN1xssY
Episode 286: Errol Morris — https://rationalreminder.ca/podcast/286
Episode 210: Prof. Ludovic Phalippou — https://rationalreminder.ca/podcast/210
Episode 237: Who are you, and who do you want to be? — https://rationalreminder.ca/podcast/237
Episode 224: Prof. Scott Cederburg — https://rationalreminder.ca/podcast/224
Episode 284: Prof. Scott Cederburg — https://rationalreminder.ca/podcast/284
Money Scope Podcast — https://moneyscope.ca/
Books From Today’s Episode:
Epic Life: How to Build Collaborative Global Companies While Putting Your Loved Ones First — https://www.amazon.com/Epic-Life-Collaborative-Companies-Putting/dp/1544532555
Same as Ever: A Guide to What Never Changes — https://www.amazon.com/Same-Ever-Guide-Never-Changes/dp/0593332709
The Geek Way — https://www.amazon.com/Geek-Way-Radical-Transforming-Business/dp/0316436704
Tightwads and Spendthrifts: Navigating the Money Minefield in Real Relationships — https://www.amazon.com/Tightwads-Spendthrifts-Navigating-Minefield-Relationships/dp/1250280079
Flow: The Psychology of Optimal Experience — https://www.amazon.com/Flow-Psychology-Experience-Perennial-Classics/dp/0061339202
Get It Done: Surprising Lessons from the Science of Motivation — https://www.amazon.com/Get-Done-Surprising-Lessons-Motivation/dp/0316538345
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