Disclosure – Non-substantive Research
This is not substantive investment research or a research recommendation, as it does not constitute substantive research or analysis. With this commentary, Kepler Partners LLP does not intend to influence your investment firm's behaviour.
Investors have become increasingly aware in recent years of the rich pickings which can be found among companies which are yet to see an IPO. Indeed, statistics show that the range of companies which have already listed on a stock exchange are less and less representative of all of the growth opportunities which exist in an economy.
Investment trusts have been quick to respond to this trend, and an increasing number have come to market in recent years looking to invest into unquoted, private companies. Certainly, there are success stories – witness Scottish Mortgage’s investment in Alibaba way before it IPO’d.
Naturally, examples like this can lead to investors worrying about missing out and, without addressing the private company investment universe, clearly investors are limiting themselves to only a sub-set of the complete opportunity set. For many investors the worry is that the companies they are ignoring, arguably, have the best long-term wealth creating characteristics.
However, there are risks involved in unquoted stocks, and before getting carried away with the new trusts targeting them, it is worth bearing in mind that listed private equity sector, within which many trusts have demonstrated strong returns over various cycles, has for some time been focused exclusively on this area.
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