Institutional Investor with a great piece on private markets entitled: “What Investors Lose in an Undeveloped Secondary Market — Performance will suffer if investors can’t buy & sell stakes in private assets, researchers argue.”
* Investors can’t rebalance portfolios because real estate, venture capital & other alternative investments are made up of companies & assets that are privately held. These asset classes don’t trade on an exchange where they can be bought & sold at any time. While private assets have plenty of advantages, trading in & out of them is not one.
* Similar rebalancing & portfolio construction tools would improve returns & reduce risks in a portfolio consisting of private equity, real estate, venture capital & alternative assets.
* In the U.S., 60% of the market is made up of large institutions. Those transactions take 6 to 9 months to complete. Legal costs to draft documents & structure transactions are a large part of secondary deals, which have to be approved by a fund’s GP.
Conclusion: “Look for increased pressure from institutional investors to unlock liquidity”.
The solution exists – price discovery in private markets will be the killer app for blockchain… this is precisely what Inveniam does.