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PENSCO Blog

Fresh alternative asset insights and the latest news on real estate and private equity investing.

3 Big Advances for Private Equity in 2014

  |  By Christopher Orr, SDIP

2014 was a fascinating time to be covering the private equity industry.

A big part of my job at PENSCO is helping our clients navigate the ins and outs of holding private equity in a self-directed IRA account. That means I am constantly following the latest twists and turns in the private equity market, and in 2014 there were plenty.

Here are the three biggest advances I witnessed this past year:

  1. Private equity is gaining speed and popularity among investors: 2014 has been the busiest year for IPOs since 2007, according to data from PricewaterhouseCoopers, which was cited in the Wall Street Journal. Through Dec. 4 there have been 288 listings, far eclipsing the 238 debuts seen in all of 2013. A rush by private equity firms to exit the companies they own via the strong public market contributed to record high proceeds and new listings, according to PwC.

    At PENSCO, private equity is the fastest-growing asset class held by our clients in their IRAs. In 2013, 60 percent of the new accounts we opened were in the form of a private fund, private placement and other type of private equity deal. While final figures are not yet in for 2014, we expect to have seen similar demand for the year. Investors are increasingly gravitating toward holding private equity in their retirement accounts for diversification and potentially higher returns.
     
  2. The inexorable rise of equity crowdfunding: As PENSCO’s CEO Kelly Rodriques wrote on the blog, the JOBS Act of 2012 opened up a wealth of opportunities for investors looking to explore opportunities in private equity. Previously, investors had restricted access to private investments through their immediate network, which meant you essentially needed to know someone to participate in a private deal. But the JOBS ACT has led to a surge of new equity crowdfunding platforms that are helping to connect a much broader group of accredited investors with private placement deals. Over $393 million has been raised via equity crowdfunding websites, according to OurCrowd, and as of 2013, the entire crowdfunding industry is estimated to have raised $5 billion for businesses and startups. Both of those figures are forecast to have jumped in 2014.

    At PENSCO we are seeing an increasing number of investors discover private equity deals through crowdfunding portals, which leads me to my third big advancement of 2014:
     
  3. The launch of The PENSCO Marketplace®:  As more of our clients turn to crowdfunding opportunities, we have made a commitment to helping them navigate this new investment landscape. To help investors quickly and easily locate and invest in alternative assets we launched  The PENSCO Marketplace® -- a network of providers, products and services for alternative asset investors. It currently features more than a dozen crowdfunding portals that give accredited investors access to private placement opportunities in a variety of industries.

    To keep up with client demand, we expect to expand The PENSCO Marketplace® in 2015 to include more crowdfunding platforms and an ever-increasing number of options for investors who are looking to investing in alternative assets.

2015 is poised to be another exciting year for private equity.

The overall crowdfunding industry is estimated to grow to nearly $10.9 billion in total funding in 2015, up from $1.5 billion in 2011. This figure will only move higher as crowdfunding becomes mainstream. Of the 8.7 million accredited investors in the U.S. alone, only 3% of them currently participate in startup investing, which leaves tremendous potential for more investors to take advantage of crowdfunding opportunities. 

In addition, the industry is waiting to see if the SEC finalizes rules related to the JOBS Act and allows crowdfunding sites to solicit non-accredited investors -- investors with a lower net worth than those who are currently allowed to participate in equity crowdfunding. When that happens it will lead to even more explosive growth in the category.

This Blog does not provide investment, tax, or legal advice nor does it evaluate, recommend or endorse any advisory firm or investment vehicle. Investments are not FDIC insured and are subject to risk, including the loss of principal.