If COVID-19 has taught us anything, it’s that having a diverse revenue stream is paramount if you want to weather the storm. What it has also done, is shown investors around the world the importance of diversification beyond the public market.
Enter- the private capital market. If you’re an investor who’s still on the fence about delving into this realm, you’re not alone. The private capital market brings a stigma with it.
However, a little reading might let you know that the stigma associated with the private capital market is baseless. In fact, experts agree that the private exchanges are the new way to raise capital.
Here are three reasons why you’re sitting on a potential gold mine.
1. The players are on the field, they just need the ball
Think of the players as private companies. Think of the ball as you, the investor. A game can’t start without the ball no matter how ready the players are.
More private companies than ever are choosing to remain private for much longer than before. NASDAQ and other global stock exchanges aren’t the best ways and these “new economy” companies know it. The public market route is simply not as efficient and cost- effective as the private market route.
Going the private capital market way would eliminate the hassle of having to answer to the multiple shareholders that make up the public sphere. What’s more, private companies would also be able to say goodbye to the painful regulatory requirements as well as the massive monetary cost that comes with being listed publicly.
The best part? Even many “Unicorns” (companies with valuations over USD 1 Billion) are choosing to remain private because the funding in this space is so much better for their growth rate. Imagine getting a piece of that pie.
The great funding in this space also points to the fact that there are many investors in this space. This brings us to the second reason why the private capital market is a potential gold mine.
2. Get into the game at a fraction of the cost
The abundance of investors has made it possible for primary syndication platforms- like CapBridge- to break down the minimum investment sum required to a measly USD 1,000. This is a massive cutback- a 100 times (or more) lower than the usual minimum sometimes required to invest in the private capital market.
You may wonder how.
What CapBridge does is secure a lead investor for an investment. This lead investor puts in the lion’s share of the investment. This opens the door for multiple other investors like yourself to come in with any amount (USD 1,000 and up) you want to get a piece of the pie.
What was once only open to the top 1% of the investing population is now available to you. The kicker- even with such small minimum investment sums, the returns in this market are potentially higher.
3. Handsome returns await
According to data from Cambridge Associates as mentioned in Invest X (nd), private equity has shown average annual returns of 10.64% over the course of a decade- surpassing stocks and bonds on the public market. An article by The Business Times mentioned that “Private equity tends to outperform public markets” (Shah & Liangzi 2019).
There’s good reason why.
Since the assets on the private capital market are privately held, business owners have more agency to implement strategies that value-add to their business. They can take lucrative risks that would otherwise be frowned upon if they were listed publicly. This, in return, gives private capital market investors like yourself much higher returns than your counterparts in the public markets, potentially.
As with any form of investing, there is definitely risk involved. This means heavy research needs to be put into these private companies and the way they operate. This process, called due diligence, is generally extremely time-consuming.
Fret not. At CapBridge, due diligence on companies is done by our lead investors- all you have to do is decide if you trust their judgement before joining in. This frees up your time and allows your money to work for you- effortlessly.
The private capital market is your Oyster
We are sector-agnostic and have various product types to suit different risk profiles. If your investment appetite has been whet and you want to know more, we will be excited to get to know you and your portfolio needs.
Start your private market investment journey with us today.
Invest X nd, Why Invest in Private Equity?, viewed 05 October 2020, https://www.investx.com/SiteArea/Learn/WhyInvestinPrivateEquity/#:~:text=Private%20Equity%20provides%20improved%20portfolio,down% 20all%20of%20the%20time
Shah, S & Liangzi, C 2019, Diversifying your portfolio with private equity, viewed 05 October 2020, https://www.businesstimes.com.sg/hub/whos-who-in-private-banking-may-2019/diversifying -your-portfolio-with-private-equity#:~:text=Investments%20in%20private%20equity%20should,strategies%20and%20most%20importantly%3A%20vintages.&text=Alternative%20investments%20are%20any%20asset, building%20blocks%20to%20diversifying%20portfolios