Why invest in Private equity?
Why invest in Private equity?
By Vartika Gupta, Tim Koller, and Peter Stumpner
The number of public-company listings in the United States peaked in the mid-1990s, at nearly 6,000, but that number has fallen by about half over the past 20 years. The number of IPOs has also gone down sharply in this same period.
From Hamilton Lane,
There are only 2,800 public companies with annual revenues greater than $100 million. That's a small slice of corporate America, where there are 18,000 private businesses of that size.Apr 14, 2022.........................
Another indirect way to look at how companies are growing in private markets is through the rise of “unicorns,” those companies reaching private market valuations of $1 billion or more. The first unicorn was Alibaba, the Chinese e-commerce company, in 2005. Since then, there are more than 900.4 A study of unicorn companies found that roughly 60% of them stay private for at least nine years.
There is a good rational to invest in Private equity because companies stay private longer and because most of the economy is private 18,000 vs 2800. For me the reason why private equity makes sense is because it's private. managers of those companies are 100% aligned with shareholders. That is also the reason family controlled companies do better than management controlled ones.
This days managements pay attention and comply with the prevailing narrative even if there is no solid reason to do it. That is a big cost because most of the narratives pass and disappear. Why adapt our strategy to the dominant theory if it keep changing?
Even a genius cannot completely resist his Zeitgeist, the spirit of his time.
Viktor E. Frankl
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