The Finish Line Commentaries:
Retail Investors & Advisors, It's Time to Wake-Up
Author: Danny Popescu | March 29, 2021
Good day,
Given hot stock markets globally, I geeked out a bit this morning and did some research. According to the Wilshire 5000 index, at the last count, there were only 3530 publicly traded companies/businesses in the US. Meanwhile, according to SBA statistics, there are over 30 million public businesses in the US. Statista says 55% of adult Americans invested in the US stock markets last year, a figure that has remained steady over the last decade. US census reports show that the adult population in the US is roughly 209 million meaning that there are approximately 115 million Americans who invest in US markets.
Of course, given that the US economy is the largest in the world, investors worldwide also invest in American public markets, but my eyes went blurry and I figured you’d get the point. So potentially hundreds of millions of people are competing, aka driving up prices, for the same 3500 stocks when 30 million private businesses exist in the US. As such, is it a surprise that pensions, endowments, charities, and the ultra-high net worth have huge allocations to private businesses?
The same goes for fixed income/debt/credit, whatever you want to call it. Just as you can loan money publicly by buying bonds, you can also loan money privately but without the volatility experienced in public markets given public equity and debt can be traded in milliseconds.
If you’re still an investor who’s only investing in a crowded space, you might want to think again. In Canada, allocations to private securities by retail investors in barely measurable. Advisors at Harbourfront all escaped mainstream investment dealers given the lack of access to ‘retail friendly’, private securities. Given Harbourfront has an exclusive on three large private securities pools, today, roughly 30% of Harbourfront’s assets under administration are allocated to private securities, a figure which continues to grow. In regularly speaking with advisors at the bank-owned dealers and other conglomerates, in almost every case their allocations to private securities are………… wait for it……….. zero.
Enough said.
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