A new dawn: the changing face of modern investment

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| The European | 20 April 2020

The investment landscape is fundamentally shifting. The number of publicly owned companies has fallen dramatically over the last twenty years whilst the number of unicorns, or privately owned startups with a value of over $1bn, is rising. In 2019, four new unicorns were created in Europe alone. With long-term low interest rates and fewer companies entering the public markets, investors are flooding private markets in search of better returns on their money.

The increased appetite for alternative investments by private investors is reflected along the growth curve of businesses they are backing, which range from early stage through to scale up and beyond. In fact, according to Talis Capital, the amount of private wealth invested into European startups grew five-fold in the last five years alone. This spike in available capital means that companies are staying private for longer, with players like Airbnb amassing 11 rounds of funding in its 10 years. It is now valued at around $31bn.

Is this trend likely to continue? Capgemini’s 2019 “World Wealth Report” on the financial wealth of high-net-worth individuals (those with at least $1m investable assets) would suggest so. It estimates the gross figure is $72tn worldwide. And yet, perhaps because of long-standing accessibility issues and high-cost entry requirements, less than 5% of this wealth is invested in alternative asset classes.

At the same time as wealth management embraces the disruptive force of technology to access alternative investments, private equity firms have truly woken up to the benefits – and opportunities – of making their funds increasingly accessible as well as diversifying away from the traditional networks of institutional investors.

In addition, a number of other market players including retail banks, private banks, and fintech companies are launching platforms to link these individuals with relevant and lucrative investment opportunities.

Although private markets have traditionally been classed as not mainstream enough for conventional investors, they are taking on an increasingly prominent role and are now considered by many to be a key option for portfolio diversification and attractive long-term returns. As PitchBook’s “What Are The Private Markets?” report suggests, as money flows into this space and more companies stay (and start up) within it, the private markets will grow in value and opportunity. In 2020 and beyond, we are also likely to see private equity funds continue to bring individual investors on board as they move their investment strategies in line with new market realities.

Further information

www.moonfare.com

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