How to easily invest in Startups, Private Companies, & Real EstateOct 20, 2021
If you've ever wanted to invest directly in startup's, private companies, real estate, or credit, you may have found it extremely difficult or impossible to do. So, how to invest in private equity, exactly?.
The inherent problem with this investment strategy, is that these investments often yield returns that are hard to find elsewhere. For example, while the risk is high, investing in tech startup's could have 1,000x returns. And by investing in real estate, you can find steady cash flow that is hard to replicate elsewhere (with added tax benefits).
The reason this is so challenging for many is that investing in these types of assets come with unique challenges. The biggest three are often:
- Capital: This type of private equity investment that often comes with extremely high minimum's. For example, if you wanted to invest directly in real estate, buying home's/business locations is obviously extremely expensive. This makes these types of alternative investments near impossible for 99% of the population.
- Accreditation: Investing directly into young startups or private companies often require the private equity investor to be accredited. For example, in the US, accredited investors need to either have a net worth of $1,000,000 or have income match at least $200,000 annually for the last two years. Therefore, similar to the above, this excludes 99% of investors.
- Liquidity: Even if you have the capital and are accredited, a huge problem with this type of private equity investment is that they are illiquid. That means that once invested, there are usually lock-up periods/difficulties where you can't withdraw your capital. For example, if you wanted to get out of your real estate investment, you'd likely need to list your property, find a buyer to buy your home, and then spend time and money closing with them. Conversely, the most liquid markets are often the equity markets where you can buy and sell your investments in minutes.
Details aside, the summary is that these challenges make investing in these types of assets difficult.
Wish there was a better option of how to invest in assets?
Enter: Apollo Global Management
Apollo is a global alternative investment management firm that invests in credit, private equity, and real assets. They are one of the world's largest asset managers!
But the reason this investment is so unique, is because by investing in them, you're able to get access to startup's, private companies, real estate, etc. in a cheap and easy way. But not only do they give you access, but they are doing it better than anyone else right now.
Let's get into it ⬇️
Apollo is one of our top stocks within the finance sector as we think the market is severely discounting their projected growth over the next few years. There are a few things in particular that we're looking at that should fuel their growth going forward. They are:
- Q1 Merger With Athene: While a merger alone isn't extremely exciting, the reason this is huge for the company is because this merger should make them eligible to be included in the S&P 500. By getting lumped into the S&P 500 index, ETF's and Mutual Funds across the world will buy up their stock, helping artificially boost prices without any fundamental changes to their business. When you factor in the buying power of these vehicles, the should create sizable return opportunities for individual investors.
- AUM Growth to over $1T by 2027: This growth would lead them to double their current AUM in only 6 years. The reason we believe this can happen is due to management projections which have been very on target historically as well as the performance of their stock funds. In particular their credit line (think real estate, lending, etc.) has outperformed over the lifetime of the fund. This combined with their equity business unit, should deliver the AUM needed to hit their goals. As AUM is their primary source of revenue, doubling AUM should give them a significant lever to grow faster than the market has them slotted for.
- One of the largest addressable markets amongst their peers: Apollo invests in a large spectrum of private companies, real estate and credit that most of their competition does not. What we mean by that is that their mandate stretches across many different types of investments within each one of these asset classes. For example, within real estate, Apollo invests in structured credit, consumer credit, senior secured lending, leasing, and commercial real estate lending (such as 1st mortgages, mezzanine, net lease, CMBS, credit tenant leases). The list goes on and on further but the key takeaway is that Apollo goes very deep vertically within each one of their asset classes. This depth gives them the opportunity to deploy capital more-so than their peers, giving them an advantage in not only returning alpha but also generating outsized fees.
Apollo is growing their business almost faster than anyone in their space. When combining their growth, with macro tailwinds, we think the market is under-discounting the upside of this company. Pair that with the fact that you get liquidity and easier access to this type of asset class and the opportunity is not only smart but is differentiated and diversified.
This company gives you a unique way to invest in income generating assets that are typically only reserved by the 1%.
Therefore, they are one of our top financial plays and we love to their risk/reward profile!
Price Target: $100 (35% upside)
Current Price: $74
Target Date: Q1 2022
Market Cap: $32.3B
P/E Ratio: 8.54
Dividend Yield: 2.82%