Private markets may open doors to Singapore retail investors

Early investors in such markets could reap higher returns when the firms' valuations rise

- Angela Tan

Imagine owning a piece of Apple, Nvidia or Tesla before they were listed and became household names.

Investing in private companies has attracted a lot of attention in recent years as some of their eventual stock market listings have minted new millionaires.

Access to private markets allows early-stage investors to participate in companies when their valuations are relatively low compared with after they go public.

Take, for example, Apple's first investor Mike Markkula. He had put in US$250,000 for a third of the business then. Today, a third of Apple is worth US$1 trillion (S$1.31 trillion).

Also, traditional portfolios of stocks and bonds may not provide the diversification or returns necessary to meet long-term financial goals, particularly in a low-interest-rate environment. Private markets, with their potential for higher yields and exposure to alternative assets, offer a compelling alternative, but not everyone has access.

The regulatory winds are shifting, though, and retail investors who want in on the cut may soon get the golden ticket to do so.

The Monetary Authority of Singapore (MAS) is exploring letting retail investors access this space through regulated, diversified and professionally managed vehicles.

The Sunday Times looks at private markets, the allure and drawbacks, and the necessary guardrails before retail investors venture in.

BIG BOYS HAVE ALL THE FUN Historically, exposure to private markets was restricted to large institutional investors such as pension funds, insurance firms or sovereign wealth funds like Singapore's GIC.

"They either invest in funds launched by alternative asset managers or set up their own direct investment teams that source and execute specific transactions such as taking a minority position in a specific company," said Mr Ben Balzer, partner at Bain & Company.