Costs for the compensation scheme are spiralling out of control, with the FAAA estimating another $4,165 will be added to every adviser’s CSLR bill – bringing the estimated total to $5,709 – if the funding model isn’t re-examined.
Real estate credit funds have firmed as an attractive source of alternative returns in the past few years. What matters, however, and what doesn’t, for these non-bank private credit lenders, has largely been left unexplored by investors. Â Â
Investors turning to private investment as companies shy away from listing
More companies are preferring to stay private for longer, with the growing reluctance of companies to list on a stock exchange creating a swollen pool of private companies that investors are increasingly viewing as a viable sleeve in their investment portfolio.
Globally, companies are looking at alternative sources of capital to grow and expand their enterprise, with the traditional route of listing and becoming a publicly traded entity being viewed as less of an automatic choice than it has been in the past for growing companies. Concurrently, sophisticated investors are also becoming attracted to the investment opportunities these companies offer.
The result, according to Jamie Green, the executive chairman of PrimaryMarkets – a capital raising platform for unlisted companies and part of the ASX listed Complii Fintech Solutions Group (ASX:CF1) – is a “perfect storm” pushing the market towards private investment.
“Today the number of listed companies, always only a tiny fraction of all companies, is contracting,” Green says. “Over the past 25 years, the number in the US alone has halved from 8,000 to 4,000 – and it’s a global trend.
The trend lies at both ends of the spectrum, he explains. Smaller companies on an upward trajectory are finding more avenues for early-stage funding, while bigger and more successful outfits further on the maturity scale are also finding access to large scale venture capital.
“Looking through a different prism, in 2014 there were 42 late-stage venture companies worth more than $US1 billion in the US,” he says. “Today there are more than 1,000, a massive increase.”
The trend in the US is being followed here in Australia, he adds, noting that the Australian Stock Exchange has seen a decline in total market capitalization of around 2 per cent in FY2023, reflecting a “marked decline” in new listings.
“It’s not just an issue of less companies wanting to list,” he says. “It’s also the fact that many companies are deciding to stay private for longer. It could be because they find regulatory and governance demands too onerous and costly and that their high-growth strategies could alienate new institutional shareholders focused on predictable earnings and dividends.
Today, private companies have other opportunities to raise capital than they have in the past, with providers like PrimaryMarkets – which has notched $40 million in trading the last financial year – giving companies a link to direct investment. “So the need to go public to fund early-stage development is not nearly as pressing,” Green says.
“We believe there is no shortage of investor interest in these established private pre-IPO companies. We are seeing increased capital flow on our Platform in companies that are part of fintech, gaming technology, blockchain, web3 and agtech sectors.”
