When many limited partnerships investments were blowing up in the early 1990’s, we began to look at the opportunities to buy interests in existing partnerships at substantial discounts. The more the “experts” and the media derided this type of investment, the more we were interested in buying units. We discovered that many limited partnerships had worked out well, but a good number were sold either solely for the supposed income tax benefits or for the front-end commissions and fees the sponsors and the brokerage firm salespeople received. With a reasonable amount of due diligence, we found that we could determine the successful programs. This was another example of a great opportunity for contrarian investors.

We started investing in these programs about 10 years ago, acquiring interests at discounts of 20% - 80% from their value. These partnerships generally invested in real estate, but we have also bought interests in equipment leasing and venture capital partnerships. We analyze the financials of each partnership, talk to the program’s managers and financial experts and determine the value of the interests before bidding. We have been able to buy into a number of successful programs for clients at significant discounts, resulting in very attractive returns.

This market has been drying up as old partnerships end and have not been replaced by newer ones. Too many people were burned by old limited partnerships and will stay away from any such investment no matter how good the investment might be. The market was also hurt when it was discovered by financier Carl Icahn in the late 1990’s; he paid far too much for the partnership interests he acquired and drove bargain hunters away. From time to time we still see opportunities in this market.