EpicureanDeal
Epicurean Dealmaker
@felixsalmon There is and always has been a size cutoff between public & private capital markets. Efficiency barrier. +
felixsalmon
felix salmon
@EpicureanDeal but private companies are often now very big indeed. Eg TXU, Facebook -- way bigger than minimum size for going public.
@EpicureanDeal but private companies are often now very big indeed. Eg TXU, Facebook -- way bigger than minimum size for going public.
EpicureanDeal
Epicurean Dealmaker
@felixsalmon Yes, because public markets are not always the best financing/ownership vehicle for *all* companies. +
@felixsalmon Yes, because public markets are not always the best financing/ownership vehicle for *all* companies. +
felixsalmon
felix salmon
@EpicureanDeal My thesis is that the set of companies for which public markets are the best vehicle is shrinking dramatically
@EpicureanDeal My thesis is that the set of companies for which public markets are the best vehicle is shrinking dramatically
EpicureanDeal
Epicurean Dealmaker
@felixsalmon Companies undergoing transformation or restructuring, e.g.--like those owned by PE firms--are much better off in private hands.
@felixsalmon Companies undergoing transformation or restructuring, e.g.--like those owned by PE firms--are much better off in private hands.
felixsalmon
felix salmon
@EpicureanDeal agreed. And that's a problem for public markets and for individuals who would like to be able to invest in such companies.
@EpicureanDeal agreed. And that's a problem for public markets and for individuals who would like to be able to invest in such companies.
EpicureanDeal
Epicurean Dealmaker
@felixsalmon So they must do it by proxy, through 401Ks, mutual funds, pension funds, where most individuals have their equities anyway.
@felixsalmon So they must do it by proxy, through 401Ks, mutual funds, pension funds, where most individuals have their equities anyway.
felixsalmon
felix salmon
@EpicureanDeal it's almost impossible to invest in private companies through 401Ks or mutual funds
@EpicureanDeal it's almost impossible to invest in private companies through 401Ks or mutual funds
EpicureanDeal
Epicurean Dealmaker
@felixsalmon Pension funds are major limited partner investors in private equity.
@felixsalmon Pension funds are major limited partner investors in private equity.
felixsalmon
felix salmon
@EpicureanDeal right. So if you're lucky enough to be part of a DB pension fund, you have access. Those of us in the DC world, not so much.
@EpicureanDeal right. So if you're lucky enough to be part of a DB pension fund, you have access. Those of us in the DC world, not so much.
EpicureanDeal
Epicurean Dealmaker
@felixsalmon Well, lots of us don't have effective access to credit markets, derivative markets, commodity markets, etc. either. And?
@felixsalmon Well, lots of us don't have effective access to credit markets, derivative markets, commodity markets, etc. either. And?
felixsalmon
felix salmon
@EpicureanDeal It's quite easy, using ETFs, to get exposure to credit, commodities, real estate. Private equity, not so much.
@EpicureanDeal It's quite easy, using ETFs, to get exposure to credit, commodities, real estate. Private equity, not so much.
EpicureanDeal
Epicurean Dealmaker
@felixsalmon Again, you may *want* access to certain markets, but why should it be a policy objective to supply you with it?
@felixsalmon Again, you may *want* access to certain markets, but why should it be a policy objective to supply you with it?
EpicureanDeal
Epicurean Dealmaker
@felixsalmon You really think most individuals want direct or proxy access to highly illiquid private equity? The "underlyings" don't trade.
@felixsalmon You really think most individuals want direct or proxy access to highly illiquid private equity? The "underlyings" don't trade.
The_Analyst
Jordan Terry
@EpicureanDeal how dare you question The Public's right to shoot themselves in the foot with investments they dont understand?!?!
@EpicureanDeal how dare you question The Public's right to shoot themselves in the foot with investments they dont understand?!?!
felixsalmon
felix salmon
@EpicureanDeal exactly, which is why such assets provide an important diversification benefit for long-term investors.
@EpicureanDeal exactly, which is why such assets provide an important diversification benefit for long-term investors.
EpicureanDeal
Epicurean Dealmaker
@felixsalmon If people really want access to the PE model, they can buy Blackstone, Apollo, and KKR's existing or pending equities
@felixsalmon If people really want access to the PE model, they can buy Blackstone, Apollo, and KKR's existing or pending equities
felixsalmon
felix salmon
@EpicureanDeal buying asset managers is not the same as buying exposure to the underlying assets
@EpicureanDeal buying asset managers is not the same as buying exposure to the underlying assets
EpicureanDeal
Epicurean Dealmaker
@felixsalmon Market structure has been going the other way: more liquidity, shorter holding periods, less patience.
@felixsalmon Market structure has been going the other way: more liquidity, shorter holding periods, less patience.
felixsalmon
felix salmon
@EpicureanDeal another reason: we don't want to exacerbate the move towards a plutocratic rentier class of capital providers
@EpicureanDeal another reason: we don't want to exacerbate the move towards a plutocratic rentier class of capital providers
EpicureanDeal
Epicurean Dealmaker
@felixsalmon The biggest capital providers remain all of us, through our proxy participation in institutional investors, not plutocrats.
@felixsalmon The biggest capital providers remain all of us, through our proxy participation in institutional investors, not plutocrats.
felixsalmon
felix salmon
@EpicureanDeal that's not true in the PE and VC worlds, where you get a LOT of rich individual LPs.
@EpicureanDeal that's not true in the PE and VC worlds, where you get a LOT of rich individual LPs.
felixsalmon
felix salmon
@EpicureanDeal and if the institutional LPs are DB pension plans, that still leaves out most of us with DC plans.
@EpicureanDeal and if the institutional LPs are DB pension plans, that still leaves out most of us with DC plans.
EpicureanDeal
Epicurean Dealmaker
@felixsalmon You have a business model: develop an ETF that invests in private equity. I might wonder why it hasn't been done already.
@felixsalmon You have a business model: develop an ETF that invests in private equity. I might wonder why it hasn't been done already.
DoubleDeuce
DoubleDeuce
@felixsalmon @EpicureanDeal Which is why 401k and mutual funds are inadequate investment tools. Diversify, right?
@felixsalmon @EpicureanDeal Which is why 401k and mutual funds are inadequate investment tools. Diversify, right?
felixsalmon
felix salmon
@DoubleDeuce @epicureandeal my point is that it's impossible for individual investors to diversify into private equity
@DoubleDeuce @epicureandeal my point is that it's impossible for individual investors to diversify into private equity
DoubleDeuce
DoubleDeuce
@felixsalmon @epicureandeal I agree with that but it's not "impossible" but pretty damn close; It's not a $ issue, it's minimal opportunity.
@felixsalmon @epicureandeal I agree with that but it's not "impossible" but pretty damn close; It's not a $ issue, it's minimal opportunity.
felixsalmon
felix salmon
@EpicureanDeal once upon a time, public markets were attractive to a much broader range of companies.
@EpicureanDeal once upon a time, public markets were attractive to a much broader range of companies.
felixsalmon
felix salmon
@EpicureanDeal This is a stock-market syndrome, it's not endogenous to companies.
@EpicureanDeal This is a stock-market syndrome, it's not endogenous to companies.
EpicureanDeal
Epicurean Dealmaker
@felixsalmon + Companies best suited to public ownership have a *specific* profile: growthy, transparent, predictable. Not all companies do
@felixsalmon + Companies best suited to public ownership have a *specific* profile: growthy, transparent, predictable. Not all companies do