Limited liability partnerships

[Meadbh]

Does anyone have experience or expertise in these investments?

 

[Rich_by_the_Bay]

Oops - my error. I read LLC's instead of LLPs.

Time to go to bed.

 

[Martha]

Are you talking about publicly traded LLPs in Canada, like some oil and gas companies?

 

[Gumby]

Could be master limited partnerships, usually associated with oil and gas (like Kinder Morgan)

 

[brewer12345]

Are you talking about publicly traded partnerships or private issue stuff?

 

[Meadbh]

Private issue stuff.

 

[haha]

Private issue stuff.

Can be a great way to get killed. Your control is non-existent, as is regulatory oversight. So the reputation and ethics of the GP are paramount.

I think if you have very good business connections sometimes these might be fine. I don't, so I stick to publically traded vehicles, and look them over very closely anyway, as the issue of no vote is till there.

Buffet's early vehicle, the Buffet Partnership, is an example of a very good experience as a limited partner.

Also remember, the partnership is only a vehicle. The underlying venture still has to succeed.

Ha

 

[Martha]

Well, it depends on the investment. I have invested in the past in real estate developments that were set up similar to LLPs. It used to be that limited partnerships required that the general partner be liable for the partnership debts. Now with LLPs that is not necessary.

As a partner in an LLP you are only liable for any debts that you guaranty and if, as Rich mentioned in his post he deleted (), if you use such an entity for professional services, you are still liable for your own negligence.

One big issue with investing in an LLP as a pure investor is that usually there are limits on sale of your interest. There might be a right of first refusal and the price for the entity to buy it back may be low, discounted for the lack of marketability. You should read the offering closely so that you know restrictions on transfer. Even if there are no restrictions on transfer, they are not very marketable. Who would you sell it to?

As to whether it is a good deal or not, that of course depends on the deal. Ha points out significant issues with evaluating the deal and the players.

 

[Martha]

I am going to mention one more thing. Many doctors and other professionals get private placement offerings. I have seen many lose their shirts on these deals.

 

[brewer12345]

I suppose I should trot out the old saw about limited partnerships:

In the beginning, the GP has all the experience and the LPs have all the money. In the end...

 

[Meadbh]

Thanks everyone, especially Martha, that's great information.

 

[Martha]

If you want, PM me if you have any questions.

 

[heyyou]

Do we know anyone who recommends buying LLPs, other than the salesmen? 35 years ago, I eventually lost my principal (two years of my gross income) while the GP had made his 20% at the start. I used to wonder what that lost money was worth, compounded over time. LLPs were the hedge funds of that period, with similar fees and similar high risks.

 

[Peaceful_Warrior]

I'm currently invested in two private mortgage fund companies and they've produced 7-12% returns consistently over the last few years. Closer to 7% this year, but all in all very pleased.

As other posters mentioned, read everything in detail and understand what you're getting into. If they're in mortgages, know what kind of loans the offer and what LTVs they use.

In my case it was easy because somebody I trusted already had been investing with them for a while... so all I had to do was "trust but verify" and things have been good since.

Even know with foreclosures, etc, the funds are bringing in 7%+ consistently. I can't argue and for those in CA I'd recommend at least one of these two companies in a heartbeat - they haven't missed a single monthly profit distribution in almost 60 years.

 

[Maurice]

I was a partner in a big consulting firm (former big 6) that was structured as an LLP. I also have a private equity investment through my current employer which is stuctured as an LLP. It's not something I'd get into lightly.

 

[Maurice]

I am going to mention one more thing. Many doctors and other professionals get private placement offerings. I have seen many lose their shirts on these deals.

Private placements aren't usually LLPs, though, at least in my experience, they're just unregistered stock that can only be sold to qualified investors. I've invested in a couple of these, and still hold one (a de novo bank). Lack of liquidity can be an issue, thats for sure.

 

[Martha]

Private placements aren't usually LLPs, though, at least in my experience, they're just unregistered stock that can only be sold to qualified investors. I've invested in a couple of these, and still hold one (a de novo bank). Lack of liquidity can be an issue, thats for sure.

A fair number of private placement real estate developments are packaged in LLCs, LLPs or limited partnerships.

 

[Meadbh]

The investment I'm looking at is a real estate LLP planned for 2008.

I already have one private placement in my portfolio. It's venture capital for a biotech startup. Not yet profitable, but revenues are increasing, the management team is experienced and the business plan is sound.

Don't worry, I'm not one of those foolish docs who [-]lose their shirts [/-]get sucked into scams. Alternative investments currently make up no more than 5% of my portfolio and will not exceed 10% (unless they do very well, in which case I will convert them into equity and fixed income).