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Active Microcap: A Liquid, Transparent Private Equity Alternative – Acuitas Investments

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The views expressed in this article are those of the authors as of the dates of the article. The opinions expressed are subject to change, are not guaranteed and are not intended as a forecast or as a recommendation to buy or sell any security.

Microcap investing and Private equity investing may have several inherent differences, including investment objectives, costs and expenses, liquidity, safety, guarantees or insurance, fluctuation of principal or return, and tax features. The differences depend on individual strategies as defined in prospectus. In general, Private Equity capital is not quoted on a public exchange and consists of investors and funds that make investments directly into private companies or conduct buyouts of public companies that result in a delisting of public equity. Capital for private equity is raised from retail and institutional investors, and can be used to fund new technologies, expand working capital within an owned company, make acquisitions, or to strengthen a balance sheet. The majority of private equity consists of institutional investors and accredited investors who can commit large sums of money for long periods of time. Private equity investments often demand long holding periods to allow for a turnaround of a distressed company or a liquidity event such as an IPO or sale to a public company.

Past performance does not guarantee future results. The data provided in this reprint is historical sector or index specific performance and is not indicative or predictive of any future returns. You may not invest directly in an index or sector. The historical returns provided are not representative of any Perritt Fund. Standardized performance for our funds can be obtained by clicking here.

The Russell 1000 Index is a stock market index that represents the highest-ranking 1,000 stocks in the Russell 3000 Index, which represents about 90% of the total market capitalization of that index. The Russell 2000 Index consists of the smallest2,000 companies in a group of 3,000 U.S. companies in the Russell 3000 Index, as ranked by market capitalization. The Russell Microcap index is a capitalization weighted index of 2,000 small cap and micro cap stocks that captures the smallest 1,000 companies in the Russell 2000, plus 1,000 smaller U.S.-based listed stocks. The Cambridge Associates LLC U.S. Private Equity Index® is an end-to-end calculation based on data compiled from 986 U.S. private equity funds (buyout, growth equity, private equity energy and mezzanine funds), including fully liquidated partnerships. EV/EBITDA, also known as the enterprise multiple, is a ratio used to determine the value of a company which measures as firm as a potential acquirer would, because it takes debt into account – an item which other multiples like the P/E ratio do not include. Enterprise multiple is calculated as enterprise value / earnings before interest, taxes, depreciation, and amortization. Debt/Enterprise Value is a calculated as debt / enterprise value, which is an economic measure reflecting the market value of a whole business. It is a sum of claims of all the security-holders: debtholders, preferred shareholders, minority interest, common equity holders, and others. Active microcap is measured by the average “net of fee” return of all populated mandates as provide by investment manager database eVestment Alliance.

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