The state of private investing

There has been no shortage of public discussion on the state of the world’s public stock markets. Even President Trump himself hasn’t hesitated to boast about the rapid rise of stock indexes during his time in office.

However, as we’ve been constantly preaching on these very pages, the stock markets provide a very shallow and short-term snapshot of the investment environment. Instead, long-term investors should look at other pieces of information, which is what we’ll do presently.

A rising trend continues

For example, according to a report issued by global consulting firm McKinsey & Company, titled McKinsey Global Private Markets Review 2018: The rise and rise of private markets, which was released in February of 2018, although the rise in the public markets was well documented for the period in review, with the S&P rising by about 20 percent, for example, the private markets kept up the pace, too. Specifically, for the period in review, private asset managers raised a total of almost $750 billion globally, which furthers an upward trend that began eight years previously.

On the local front, the Canadian Venture Capital and Private Equity Association (CVCA) in September of 2018 released its review of Canadian private equity and venture capital, and came up with a number of positive findings. Specifically, venture capital investment continues to rise in Canada, with $1.7 billion raised across 308 venture-capital deals for the first half of 2018, which represents a seven-percent increase from the previous year. This continues a five-year positive trend in terms of size and volume.

All’s well on the local front

In addition, the CVCA reported a robust market for private investment for both early-stage and established firms, with the backdrop of a high-growth and low-interest landscape combined with a high level of “dry powder” (highly-liquid marketable securities or large amounts of cash reserves) boding well for the country’s private-investing sector.

ASCEND GRP is an asset-management firm, with offices in Toronto, Richmond Hill, and New York, that services clients seeking investment opportunities worldwide.


Private financing is the new normal

The word financing can have different meanings to different people. For those that often borrow, financing means securing the money and capital needed to either stay afloat or engage in a new venture. For investors, financing is a form of investment where you essentially provide money to those who need it at terms that are acceptable to both parties.

Matching supply and demand

In other words, financing is a relatively simple concept. It’s about matching those who need money with those that can provide it. Financing has certainly evolved over time. As economies have advanced and modernized, financing moved from private and select transactions to essentially institutionalized exchanges of capital. That’s what the banking system has become, hasn’t it?

But, as with so many aspects of life, we’re coming full circle again as we see private forms of financing becoming increasingly more common. There are many reasons for that. In a nutshell, public financing has become highly regulated, highly predictable and, as a result, highly cautious, too. So, people have turned to private forms of financing.

Finding unique opportunities

Again, there are two sides to the financing equation. On one side, there are those that are seeking sources of money and capital. On the other side, there are those seeking to invest money and capital. So, when private financing is involved, these types of arrangements tend to be very unique, less compliant with rules and regulations, and more open to higher returns.

In fact, private financing has grown so much that the Canadian federal government even has an entire website section dedicated to the sector. From private debt and equity, commercial term loans and lines of credit to microcredit, commercial mortgages and angel investing, the number of ways that individuals and organizations can transact in private investing is as infinite as one’s imagination.

ASCEND GRP is an asset-management firm, with offices in Toronto, Richmond Hill, and New York, that services clients seeking investment opportunities worldwide.


Why private investing keeps growing

(Image: Business people shaking hands in agreement by under Creative Commons license. )

The terms “private investing” and “public investing” might not have much meaning to the lay person, and can even cause some confusion among people that have invested in the past. Although the terms in and of themselves suggest how they differ, it’s important to specify what those differences are, and how they can make a difference to investors.

As the names suggest, in general, public investing is more open and transparent, and is done in large part in open forums, such as stock exchanges, while private investing is done, well, in private. But that doesn’t mean public investing doesn’t contain privacy, or that private investing isn’t done in public. It just means the rules surrounding both are different, and in some important ways.

Traditional versus alternative investing

Public investing usually comes with traditionally stricter reporting and compliance requirements. They often must come with a prospectus, a legally-required document containing all important details of an investment, regular reporting requirements, and other regulations.

Private investing, on the other hand, requires almost none of that, and the rules surrounding disclosure and reporting are much less rigorous. While traditionally, this approach was seen as riskier and perhaps less protective of investors, recent history has changed much of that thinking as the investment industry has shifted towards private investing.

In fact, according to the Wall Street Journal, in 2017, $2.4 trillion was raised via private investing in the United States, while only $2.1 trillion was raised via public investing. A few years ago, many investors would never have seen this trend coming. Now, private investing is an entrenched part of the global investment landscape.

The private-investing advantage

So, what does this really mean to investors? Well, it means, especially for institutional and accredited investors with large amounts of capital to invest, that the power of your investments are in your hands. Private investments often involve small groups of large investors with similar interests that can tailor their investments to their own needs.

It also means that such investors now have more places to go to in order to find experts in the field knowledgeable and experienced enough to find private investment opportunities generally not available on the public markets.

In essence, private investing should be a win-win situation for everyone involved, as long as you’re connected with the right people seeking the right opportunities to achieve higher-than-average investment objectives.

ASCEND GRP is an asset-management firm, with offices in Toronto, Richmond Hill, and New York, that services clients seeking investment opportunities worldwide.

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