0122_Finance Digital Edition - Page 6

FINANCE & INVESTING
CAPTRUST ’ s Brothers says most financial advisors are unequipped to evaluate private equity offerings due to the lack of transparency , audits and other performance data available with public market investments . “ The best thing most financial advisors can do is introduce clients to people who do private equity and have a verifiable track record as to how their investments or funds have performed in the past ,” he says . At that point , clients can do their own due diligence and make their own decisions .
A similar process should also apply when investing in people . The pull to want to be part of a local business such as a hotel or restaurant can be powerful , Brothers says , and while he has seen successful investments made to support the business dreams of friends and family members , he says anyone considering giving money to someone they ’ re close to should think carefully and have the right attitude . Otherwise , more than dollars can be lost .
“( Investing money with ) friends and family — usually a bad idea because it mixes two parts of people ’ s worlds that often shouldn ’ t be mixed ,” Brothers says . “ If you have any expectation to maintain the personal relationship , I ’ d go in with very low expectations on the business relationship . I ’ ve seen a lot of situations where really good family relationships were destroyed or tainted badly .”
Private equity groups are working to establish the Sacramento region ’ s profile as a source of venture capital , Torinus says , and there is increasing emphasis on supporting companies that offer medical solutions and green technologies . Groups like the Sacramento Angels , the new Growth Factory accelerator , Moneta Ventures in Folsom , Roseville ’ s DCA Partners and the Central Valley Fund provide businesses with capital ranging from tens of thousands of dollars to tens of millions .
While the allure of a return of 10 , 20 or even 30 or more times your original investment can fuel lavish dreams , Brothers notes that these are long-term investments and the gains may not be realized until the company is sold or goes public . He says it should be looked at as a “ generational investment ” with returns that can be passed to your children .
Torinus ’ advice for private equity investments is to only invest in something you understand . It ’ s sometimes less likely to find red flags on a spreadsheet than in an investor ’ s own gut .
“ Is the leadership team credible ?” Torinus says . “ Do they have any track record of success ? Are they self-aware — do they kind of know where their weak spots are and where they ’ re likely to have trouble ?” He says these are just a few of the basic questions investors have to ask themselves . “ Sometimes you get people with this really slick , polished game plan and it all just sounds like sunshine and puppies . It ’ s almost too good to be true .
Ken Smith is a freelance writer , public relations consultant and video producer who is also managing editor of Sierra Sacramento Valley Medicine magazine . More at kdscommunications . com .
78 comstocksmag . com | January 2022