Blurring Lines between Public and Private Transactions and Assets
In our global operations with Crowd Valley, we are privileged to see partners working in various segments of the new digital investment market. Some segments we as a company are directly involved in, such as peer to peer and digital asset marketplaces, and some form tangents to the businesses at large.
Wealth management and trends since several years back represent an interesting tangent, with firms such as Betterment, Wealthfront directly targeting millennial wealth management in the digital domain. Such a market is projected in the multiple trillions to come, and its growth can be seen to follow a similar pattern as Charles Schwab capitalized on in the 90’s with baby boomers and their wealth management needs during the great deregulation of the US securities industry. However, the rise of these new, digital investment advisors is still largely played down in various discussions.
What’s interesting is the cyclical nature of innovation and how it transcends small friction or hiccups; innovation drives improvement and where there is improvement, friction is overruled. We’re privileged to be in various conversations with established, multinational firms and can see the internal struggles in various conversations. They are a clear marker in discussions, where established technology and operating models represent where we are and new weak signals start to emerge signaling a change. Embracing a weak signal is no easy thing to do and neither is predicting timing, when it comes to future innovations and their deployment lifecycle. But predicting the direction of technological advances is not the biggest challenge, embracing it may well be.
Alternatives and Private Assets Destined as “Play Money”?
Looking at the innovations and macro trends toward greater efficiency, digital investment markets, portfolio management tools and wealth management functions are sure to blend, overlap and co-exist, if not even directly work together. Alternatives and private assets have represented a burdensome set of assets to manage, with illiquid characteristics, lack of information and significant variance. Yet, and possibly because of this, private assets have often been left outside the focus of more traditional wealth management casting aside 5-20% as ‘play money’ in alternatives or angel investments.
With private companies facilitating quasi-public fundraises becomes more and more frequent, for example through the new 506(c) offering as part of Regulation D of the Securities Act of 1933 in the United States, the creation of information on private companies in the public domain blurs the line between these two distinctly separated asset classes. Similar developments can be seen to emerge in countries outside the United States, or within the United States as it relates to the dozen or more intra-state securities expansions adopted. Several countries also adopt forced transparency standards wherein a private company’s operating history, assets and liabilities can largely be obtained from official repositories such as Company’s House in the UK. These types of adoptions create an interesting accountability to information on private companies.
Where Future Supply Meets Demand
Despite alternatives and several private assets containing clear and distinct characteristics, the rise of clearer individual participation and interest in their own portfolio management and asset allocation, one can see how the intersection becomes clearer in the global marketplace and how operators must adapt accordingly in the future. End users should benefit from the increased transparency and efficiency, but demand should also meet the increasing interest in private companies and cross border transactions. Certainly, we already see weak signals of future applications being deployed across the world and work with several pioneers on embracing these trends.
Osterland, A. (2013). Robo-advisors are no immediate threat, wealth managers say. CNBC
Barret, J. (2014). Leading robo-advisor hits funding milestone. CNBC
Credit image: James Green http://bit.ly/15YkQaw
About the author - Markus Lampinen
Internationally awarded entrepreneur, active in pioneering new securities models worldwide at the intersection of the Internet and the securities markets. Markus serves as the CEO of Crowd Valley Inc, a US-based crowdfunding marketplace platform provider and a spinoff from the Grow VC Group. He is also a global investor and partner at the Grow VC Group. In his role as COO of Grow VC, he recruited over 120 individuals, built up a global team on six continents and expanded operations to over 150 countries. In his earlier businesses, he served in diverse roles, taking on the responsibilities of CFO and increasing sales growth of over 270% per year over several subsequent years. Markus holds an M.S. and a B.A. in Economics.
Markus has pioneered new funding models in the US and Europe, advised policy makers worldwide—including the SEC, the European Commission and Italian regulator CONSOB—for more effective markets, and worked with visionary organizations such as the World Bank and the Kauffman Foundation to improve frameworks for new funding models, including crowdfunding, cross-border investments and private placements. He serves as a frequent public speaker on related themes. He is married and constantly bringing presents from his travels to his two children