Private companies seem to be making quite a few headlines of late. Whether we’re talking about WeWork’s botched IPO in 2019, Snowflake’s wildly successful public debut in 2020, or the recent commotion caused by privately-held fintech start-ups like Robinhood, more and more investors are taking notice of private companies and private market opportunities in general. And for good reason.
In a study conducted by Cambridge Associates, investors with private investment allocations of at least 15% outperformed investors with little-to-no private market exposure in their portfolio by 1.8% per year over a recent 20-year period.
In addition to potentially higher investment returns, private investments can offer diversification benefits when paired with traditional stock and bond portfolios. Although private investments involve different investment risks, the lack of sentiment-based daily pricing we see in public markets can help dampen volatility in a portfolio. That volatility dampening can help investors stick with their long-term financial plan, which is one of the most important determinants of achieving financial goals and objectives.
Of course, private investments are not suitable for all investors. Their lack of liquidity, longer-term investment horizon, and additional due diligence requirements are important factors that investors must evaluate when determining if private investments could make sense in their portfolio.
We are asked by clients and prospects all the time, “Should I consider investing in private real estate or private equity?” If you’ve been wondering the same thing, don’t hesitate to reach out to us. Our private investment group is constantly exploring exclusive opportunities to help qualified investors achieve greater diversification and more robust returns, we’d be glad to help you figure out if private investments have a role in your financial plan.
For more than three decades, Cobblestone has been a trusted partner to individuals, families, and institutions. In the same way distinctive cobblestones are thoughtfully assembled to withstand any conditions, we provide the breadth of services, depth of expertise, and team approach required for resilient financial stewardship.
DISCLOSURE An investment in private assets is speculative and may involve a high degree of risk. Opportunities for withdrawal or redemption and transferability of interests are restricted, and investors may not have access to capital when it is needed. There is often no secondary market for the interests and typically none is expected to develop.
An investment in private securities should not be made unless the investor is prepared to lose all or a substantial portion of the investment.