Private Market Investing Has Grown More Popular

Matty-Sways

More money is being funneled into private markets because of the better returns.

Investors have been aligning with a general trend towards increased investment in private assets. These assets typically have low liquidity and are by definition not able to be traded publicly. Examples of assets in the private market include private debt and private equity. In terms of private equity, there is a heavy investment in property.

The top four private investment firms have increased their asset holdings by 76%, reaching a whopping $1.3 trillion in assets. Additionally, venture capital is another arm of the private market that has grown in recent years.

Venture capital firms have been keen on investing in startups from Silicon Valley. For example, SoftBank’s vision fund has taken large bets on young startups. The Vision Fund has $100 billion in investment capital. However, these investments do not always pay off. WeWork lost billions in value due to poor management.

However, studies have shown that private market investment can give increased returns. Venture funds have on average given a 3% higher return than the S&P 500. The idea to invest in private markets originated from David Swensen when he was trying to figure out how to get the largest return when deciding where to invest Yale’s endowment.

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Economics, Finance and Investing

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