There’s blood in the water, and the sharks are circling.

I’m not talking about our swimming sea creatures; I am talking about financial sharks.

The ones that dive in almost immediately after business collapses like the banks we’ve witnessed these last few weeks.

And I’m talking specifically about private equity funds. They’re the ones that swoop in to buy out companies that are underperforming and struggling to stay afloat.

After Silicon Valley Bank (SVB) failed and the government took over the company, the FDIC tried to auction off the bank’s assets.

There was just one problem: no one was willing to buy. No other banks wanted to deal with the mess that SVB left behind.

Now the private equity sharks are circling. According to Bloomberg, Apollo Global (APO), Blackstone (BX) and KKR (KKR) are looking at buying up some of SVB’s loans – likely at a huge discount.

Here at the Intelligent Income Daily, we’re focused on finding the safest income investments on the market. Often, the best deals are found when everybody is panicking. It’s one of the best times to buy for those who understand what they are investing in and have the patience to see its value unlocked over the long term.

Today I want to explain how private equity funds work. I’ll also show you how you can get a piece of the lucrative profits they make while still limiting your risk.

How Private Equity Makes Millions

When most people think of investing in stocks, they plan to take a passive role. They’ll buy shares and let the company “do their thing.” Hopefully, over time, they’ll collect dividends and the shares will be worth more as the company grows.

Private equity takes the opposite approach. Instead of buying shares in a company, they buy the whole thing. And instead of letting the company muddle along, they take an active role in managing it, selling off parts that aren’t needed and restructuring it so that it’s more profitable.

Their goal is to take undervalued, mismanaged businesses and turn them into companies that investors are willing to pay top dollar for.

But in order to pull off these transformations, there’s two things that private equity needs: money and time.

To raise the money needed, private equity managers pitch funds to sophisticated investors that promise market-beating returns.

According to various studies, over the long term, private equity annualized returns are 2-4% higher than publicly traded stocks.

But there’s a catch: getting in on these investments requires committing millions of dollars to being locked up for up to a decade (to give private equity time to find businesses to buy, fix them up, and sell them at a favorable price). And at the end of the day, it’s still a highly risky investment.

The average person isn’t going to want to or be able to invest in private equity.

But we can do the next best thing: invest in private equity fund managers, like the previously mentioned Apollo, Blackstone and KKR. These managers have dividend yields of up to 5.1% and capital gains potential of 30%.

How Fund Managers Deliver Dividends to You

Private equity fund managers collect fees on the money they invest. It starts with a 2% annual management fee on assets under management. And when you manage hundreds of billions like these titans do, it adds up. Plus, they earn 20% of all the profits after certain thresholds have been met.

These managers attract top talent from around the world. That allows them to manage funds specializing in credit, infrastructure, real estate, and impact investing. That way, they can rotate between whichever strategy works best. These managers are doing all the investing work for us.

Private equity tends to generate the most fees because it has the highest returns. Clients are happy to split profits as long as there are plenty to go around. Those profits benefit the stocks of these Wall Street heavyweights.

And the clients signing up for these funds are investors with access to some of the largest pools of money in the world: endowments, sovereign wealth funds, pension plans, and insurers.

As these asset managers accumulate more funds through helping investors deploy capital, they’ll earn more fees, which translates into more earnings for their shareholders.

So if you’re looking for a less risky way to profit from the banking crisis, consider investing in these managers. They are sitting on billions of dry powder. That enables them to patiently wait for distressed prices. When everyone else is panic selling, they are buying at fire sale prices. And it’s a lot easier than trying to time the market yourself.

When evaluating these managers, we look at several keys to choosing the best one.

• First is valuation. This is usually the price-to-earnings, or P/E ratio. Some managers are cheaper (lower P/E) than others.

• Second is performance. If the manager has historically generated better profits for its clients, it’ll make more money, too, in the long run.

• Lastly is growth. You want a manager that’s growing assets under management more rapidly than its peers. This is the most reliable way to grow fee income.

And right now, we’ve identified one asset manager that’s beating Apollo, Blackstone, and KKR in these three metrics. So if you’re interested in learning more about it, click here.

Rather than waiting around for the dust to settle, you can own shares in some of the strongest private “sharks” on the market… and generate safe, reliable income.

Happy SWAN (sleep well at night) investing,

Brad Thomas
Editor, Intelligent Income Daily