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How The Incredible Shrinking Stock Market Affects Your Fund

FYI: More companies don't want you, or any other investor, to buy their stock.

Instead of listing their shares on a stock exchange, businesses are going private or never going public in the first place. Security company ADT, for example, pulled its shares off the market this spring after going private in a nearly $7 billion buyout. Uber, meanwhile, makes it simple for customers to hail a car, but investors can't easily buy a piece of the privately held company, which is valued at more than $60 billion
Regards,
Ted
http://bigstory.ap.org/article/7953517a32e9423ca8872a4371f252ba/how-incredible-shrinking-stock-market-affects-your-fund

Comments

  • beebee
    edited September 2016
    omit
  • edited September 2016
    Folks,

    There is an indirect way (for the small retail investor like myself) to invest in some of these privetly held companies and that is through a private equity and/or business developemnt mutual fund. A mutual fund that I own that does this is ALPS Red Rocks Listed Private Equity Fund (LPEFX). I will link more information once I have access to my lap top as I am currently using my tablet.

    Old_Skeet
  • edited September 2016
    Looks to be a *very* indirect way, based on what M* reports as its holdings. I'm not that impressed w/it, but that's just one view.
    Old_Skeet said:

    Folks,

    There is an indirect way (for the small retail investor like myself) to invest in some of these privetly held companies and that is through a private equity and/or business developemnt mutual fund. A mutual that I own that does this is ALPS Red Rocks Listed Private Equity Fund (LPEFX). I will link more information once I have access to my lap top as I am currently using my tablet.

    Old_Skeet

  • edited September 2016
    @rforno,

    Thanks for making comment.

    What might be other options for the small retail investor seeking exposure in some privetly held companies through a mutual fund wrapper? Any suggestions you might have to offer would be appreciated.

    For information purposes ... I have owned this fund since October 2011 with my total return in the fund being better than 80% and with annualized returns being about 12.7% as detailed in my last brokerage account statement. In addition, the yield on amount invested, for me, is about 4.5%. In this low yield environment I think I'll continue to hold it. While it might not be right for some I am pleased, thus far, with what it has done for me.

    Again, I'd like to take a look at at some other options if you have a similar mutual fund to offer.

    Thanks again ... for your comment.

    Old_Skeet
  • edited September 2016
    Hi Skeet -

    It's not really my area of investing interest or expertise, so my views can (and should) be taken with a grain of salt. However, looking @ its holdings at M* I don't see much in the way of investing in those Uber-like big companies that aren't publicly traded yet. While there are some apparent PE companies listed in its top holdings -- who may indeed own those kind of startups -- many others seem to be traditional BDCs or PE firms that you could own yourself just by buying shares, which is why I said the fund didn't impress me much. But hey, if it works for you, that's what matters. Investing is as unique as each of us!

    Other than this fund, the only other opportunities in such areas might be in the few # of funds existing in the microcap arena ... but I don't really invest there so ... *shrug* I dunno.

  • GSVC and SVVC are BDC's that invest in this space and they trade at a discount to NAV. One problem- their management fees are quite high.
  • edited September 2016
    Hi @MOZART325,

    Thank you for your sugestion to look at GSVC and SVVC.

    The first screen that I took these to task was a performance screen test.

    Here was the results with their respective performance ... ytd ... 2015 ... 2014 ... 2013 ... & 2012.

    LPEFX ... 1.65% ... (-0.56%) ... 0.44% ... 41.26% ... 29.70%

    GSCV ... (-18.35%) ... 8.57% ... (-28.62%) ... 43.42% ... (-39.57%)

    SVVC ... (-14.53) ... (-56.19%) ... 5.78% ... 34.67% ... 21.70%

    Negative years are in (-x.xx%)

    After review of this analysis I went no further since LPEFX was the better performer and goes to show how tough of space private equity and business development operates with the losses the other two have had. And, it makes me feel better about my pick to invest in this space through LPEFX.

    Thanks again for you suggestion to review the subjects.
  • edited September 2016
    Year old article, but relevent.
    Getting Into The Unicorn Boom: 10 Mutual Funds With Stakes In Pre-I P O Tech Stars
    by Steve Schaefer , FORBES STAFF
    Of course, for most investors there’s little need to chase the rich valuations brewing in private markets. Almost every high-profile I P O in recent years has revisited its offering price, including Facebook, Twitter TWTR +21.42% and Alibaba . But for those keen on getting early exposure, mutual funds that allocate a portion of their holdings to the space, without betting the farm that every billion-dollar startup is going to be a long-term success, is a reasonable strategy.
    According to Pitchbook’s 2015 Unicorn Report, T. Rowe Price owns stakes in 14 unicorns, outpaced by only Sequoia Capital, Andreessen Horiwitz, Kleiner Perkins and SV Angel. Wellington Management has participated in funding for 12 unicorns, while Fidelity has been involved in eight such capital raises.

    The table below shows 10 of the funds that own stakes in the tech world’s unicorns, and even though the businesses have lofty valuations, they still represent a small piece of the funds’ overall portfolios
    image
    http://www.forbes.com/sites/steveschaefer/2015/10/14/unicorns-funds-fidelity-trowe-uber-dropbox/#76f71c9f57f4

    Crony Capitalism for the Private Equity and Investment Banking Set ?

    This is listed as an opinion piece,but still worthwhile for further background.
    Startup Valuations, Mutual Funds, And The Saga Of Blue Bottle
    June 16, 2016 - By Max Cherney
    ...mutual fund valuations are one of the few hard data points the public has to assess what the company’s shares are worth, or at least what mutual funds think they are. And that’s important—more than it has been historically—because of changes introduced by a 2012 law: the Jumpstart Our Business Startups (JOBS) Act
    Sold as a way to make the growing practice of crowdfunding legit, the JOBS Act also contained a provision that has had a profound impact on how companies are funded and at what point they go public: the fed axed the 500 rule—requiring a company to go public after it had more than 500 shareholders—and now only requires a company to I P O after it hits 2,000 accredited investors (though the number remains at 500 if those investors are not accredited).

    Without the JOBS Act, Airbnb and Uber would likely have been required to go public (as Facebook was). Hence the number of large, private companies has swelled—why put an enterprise at the mercy of Wall Street’s grueling quarterly expectations if not absolutely necessary?
    https://mattermark.com/startup-valuations-mutual-funds-saga-blue-bottle/

    The coffee wars of San Francisco are back on!
    https://techcrunch.com/2016/09/25/blue-bottle-coffee-is-raising-another-a-big-round-of-funding/?
    Silicon Valley is known for plenty unusual investments, anywhere from alternative food products to space exploration, and the coffee industry is certainly no exception. But there’s logic to it: there’s a huge coffee market and a near-perfect comparable in the market, with Starbucks hanging out at an $80 billion valuation. For any coffee company, capturing even a fracture of that market already means the company has hit unicorn status
    image
    UNITED STATES SECURITIES AND EXCHANGE COMMISSION
    Washington, D.C. 20549
    FORM D

    Notice of Exempt Offering of Securities
    Name of Issuer
    Blue Bottle Coffee, Inc.
    Jurisdiction of Incorporation/Organization
    DELAWARE
    Year of Incorporation/Organization
    Over Five Years Ago
    X Within Last Five Years (Specify Year) 2012
    Yet to Be Formed
    https://www.sec.gov/Archives/edgar/data/1560324/000156032415000001/xslFormDX01/primary_doc.xml

    https://techcrunch.com/unicorn-leaderboard/

    Boy ! Did we miss this one !
    https://www.crunchbase.com/organization/theranos#/entiy

    SCIENCE
    Lesson of Theranos: Fact-Checking Alone Isn't Enough
    AUG 8, 2016 10:00 AM EDT
    By
    Faye Flam @ Bloomberg
    Elizabeth Holmes,at just 32, is the founder and chief executive officer of the high-tech diagnostics company Theranos, a startup valued at $9 billion that promised to revolutionize blood testing. Until recently, she was the world’s youngest female self-made billionaire..
    Aug 8, 2016 Bloomberg - Lesson of Theranos: Fact-Checking Alone Isn't Enough
    https://www.bloomberg.com/view/articles/2016-08-08/lesson-of-theranos-fact-checking-alone-isn-t-enough
    TECHNOLOGY NEWS | Fri Sep 23, 2016 | 6:52pm EDT (Reuters)
    Twitter initiates talks with tech companies over sale: sourceA sale of Twitter has been the subject of on-again, off-again rumors for many months as the company grapples with stagnant user growth, soft advertising sales and losses running at hundreds of millions of dollars a year.

    The company's business struggles have come even as the 10-year-old service has evolved into a potent global source of news, entertainment and social commentary.

    CNBC, citing anonymous sources, reported on Friday that Twitter is in talks with companies including Google (GOOGL.O) and may receive a formal bid soon. A source told Reuters that Salesforce.com (CRM.N) is also in pursuit.

    TECHNOLOGY NEWS | Fri Sep 23, 2016 | 4:29pm EDT (Reuters )
    Facebook apologizes for overstating key ad metric
    Facebook has made a significant strides into video, which has attracted significant advertising interest and has benefited from the shift in advertising spending toward the internet and other mobile platforms.

    Revenue from advertising was the biggest driver to company's total revenue in the latest quarter, surging 63 percent to $6.24 billion. "This could pose a serious blow to Facebook's video proposition, which has had so much of momentum over the last two years," said Sarah Wood, co-CEO of ad tech company Unruly, which is owned by News Corp.http://www.reuters.com/news/archive/technologyNews
  • Thanks @TSP_Transfer for the information.

    In its review, I selected Hartford Growth Opportunities (HGOAX) since it contained about 6% of it's holdings in pre-ipo holdings, UBER being one of them. It is classifed as a large growth fund by M*. It's return are as follows for ytd/2.61%, 1015/10.55%, 2014/13.46%, 2013/34.75% & 2012/26.23%. Notice it has performed better than the above public private equity and/or business development offerings studied. However, when compared to the other three large/mid cap funds (AGTHX, JDCAX & SPECX) that I own there was not enough performance difference, for me, to warrant a switch out to the Hartford Fund.

    Thanks again for posting the information and making comment.

    Skeet
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