Private markets used to be just a stepping-stone to public markets, where the really serious capital was available. However, as Frederick Pollock, MD of US-based Grosvenor Capital Management points out, with bigger deals now possible privately, more companies are avoiding going public.
Investors therefore need to now include private equity in the portfolio to maintain exposure to the full spectrum of investible opportunities. Frederick tells us in this exclusive interview that private companies “are not feeling any pressure or urgency to go public, and so if you want to access those opportunities, private investing is the way to do that”. Watch or read below to learn more about this exciting asset class.
Something you'll see as a theme is that companies are not necessarily going from the private markets to the public markets anymore. There's a lot of discomfort with public filings, the requirements associated with that, and management teams not wanting to have to report quarter to quarter or every six month period to six month period in that way, and so there's more of a movement to actually stay private. We've seen more of growth companies in our ability to profit from the early stage actually being private to private transactions, and we expect to see that continue over time.
The share of companies and the share of capital raisings happening in the private space has been growing over the last decade and two decades. I think that's in response to regulations around the world coming out of the 1999-2001 period. There were a lot of changes to regulations and so companies ... It's less friendly essentially to go public for management teams. It's frequently an easier and better experience to stay private. I think also, there's been greater market acceptance of companies staying private for longer periods of time.
I think that's going to continue. I don't think that's a phenomenon that's going away. Meaning there will be public offerings, but people are able to raise 10, 20, 30 billion dollars in capital in private raisings. And as long as that continues, whether that's a company like Uber, whether it's other types of companies out there, they're going to continue doing that. There's any number of firms which are referred to as unicorns that are sort of these billion dollar plus private companies. They're not feeling any pressure or urgency to go public, and so if you want to access those opportunities private investing is the way to do that.