It’s never been more important to take your time when investing in private capital. With so much dry powder around and opportunities to invest, it can be tempting to make quick investment decisions. But I’d encourage you to take your time to consider what matters and take a long-term view.
Earlier this year, I wrote about the burgeoning growth of Private Capital investment. What strikes me about this growth, is the exponential impact it could have when paired with increased interest in longer-term investments. In part, this is coming from a new generation of investors, with more private capital to invest than ever before.
The New York Times sums this movement up as “the greatest wealth transfer in history”
“An intergenerational transfer of wealth is in motion in America – and it will dwarf any of the past.” The article goes on to say that USD $16 trillion will be passed down from older Americans to millennial and Gen X heirs within the next decade.
For the next generation, time is not only on their side, but also intrinsic to their world view. With their sights set on the future they are more likely to be impact investors. The next generation want a higher number of long-term investments, ones that count toward positive environmental and social outcomes, as well as financial return.
In May this year, I attended the Private Wealth Network’s Family Office Congress in Sydney, which is an annual gathering of 400 family offices, with advisors, international and local speakers, all sharing insights. Here, this long-term considered investor viewpoint held strong. One of my other key out-takes from this event was the high level of interest in impact investing.
For us in New Zealand, this is good news. We have many businesses that are well placed, at a values level, to draw the attention of local and international investors alike. For example, New Zealand’s focus on sustainability offers returns beyond those that are purely financial.
Making long-term connections
As we find ourselves at the centre of heightened interest from both our business customers and our private investor network, it’s tempting to dive into all the ways private capital matches might be fast-tracked. But we’re taking the opposite approach. There’s far too much at stake, on both sides, for any snap judgements.
Relationships are critical in our business, and as we all know, good relationships take time. This is why we work hard on that essential investment. Time: the time to support businesses and investors, and the time to bring people together.
This year it was my pleasure to host the inaugural BNZ Private Capital forum, bringing businesses and wholesale private capital investors together. This was a chance for businesses to showcase their opportunity for growth to an alert investor community.
Over the course of the day, ambitious New Zealand businesses presented their journey and their plans for the future. With our specialist team, we supported every one of them to prepare a solid presentation. We gave them our time to consolidate, prepare, and practice.
This event would lay the groundwork, establish a first impression, and from there relationships could grow. The purpose of the forum was not to match on the spot, but to make meaningful connections, the kind that can grow into business relationships (Shark Tank and Dragon’s Den are great concepts for reality TV shows, but not one that I would advise in real life).
Investing in relationships
Time is an essential investment for businesses seeking capital, and for investors seeking the right investments. Private Capital investors are often experienced, highly connected, successful people who want to bring their intellectual, relational, and financial capital to a business. It’s a long-term journey and decisions need to be made carefully. Rarely are these connections purely ‘transactional’ in nature, increasingly there is a desire on both sides to match at a values level.
For both parties, I advise taking the time to consider:
- The role of professional advisors.
- How strong is the unique point of difference for the business is in the market.
- The current and forecasted financial position of the business.
- How well-structured the plan for capital is, and whether follow-on capital is likely.
- The expectations, values, and long-term vision of both parties.
- The track record of each party.
As I write this, a few months on from our first investor forum, we are still regularly connecting with and hearing from both the investors and businesses who were there. I’m pleased to say that this investment in time is paying off, and relationships are progressing very well. We look forward to following these journeys, and to commencing many more.
Any views expressed in this article are the personal views of Linda Sturgess and do not necessarily represent the views of BNZ, or its related entities. This article is solely for information purposes and is not intended to be financial advice. If you need help, please contact BNZ or your financial adviser. Neither BNZ nor any person involved in this article accepts any liability for any direct or indirect loss or damage arising out of the use of, or reliance on, all or any part of the content. References to third party websites are provided for your convenience only. BNZ accepts no responsibility for the availability or content of such websites.