Private companies disrupting the world
Why now may be an opportune time to invest in venture capital
Key takeaways:
- Investing in the growth phase of a private company offers the potential to capture a meaningful portion of the increase in a company’s value prior to an initial public offering (IPO).
- The number of publicly traded companies has declined in recent decades while the number of private companies has increased, and many companies are remaining private for longer, resulting in potentially more value accretion before going public.
- Fidelity has over 15 years of experience investing in private companies across its suite of mutual funds and accounts, with notable early investments including Meta (Facebook) in 2011, Spotify in 2012, Uber in 2014, and SpaceX in 2015.
- While many institutional investors have allocated meaningful portions of their portfolios to private markets to meet objectives that may not be achieved through traditional stock and bond portfolios, retail investors have historically had limited access to these markets. The emergence of new strategies, vehicles, and platform technology may encourage access to more optimal allocations, Fidelity has found. 1
- Fidelity research has also shown that among alternative investments, venture capital may offer a compelling balance between solid absolute performance, strong returns during declining equity markets, and enhanced portfolio diversification. 2
Notes:
1. Fidelity Investments, “A Study of Allocations to Alternative Investments by Institutions and Financial Advisors,” May 2023. 2. Fidelity Institutional Wealth Adviser, “Alternative Investments and Their Roles in Multi-Asset Class Portfolios,” 2023.
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