A private market primer

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Hey folks! There’s been a lot of new subscribers over the last couple of weeks so we wanted to take this opportunity to give a short private market primer.

Some of you will know all of this already, and some of you won’t know any of it. That’s totally ok! We’re all here to learn and grow together so we can take a piece of these returns away from the institutions and the ultra-wealthy and create a more equitable playing field for all. A big proponent in achieving this will come from education and others paying it forward, creating a flywheel for generations to come.

Right… Let’s start with some definitions. At the highest level, private markets, also known as alternatives, are simply investment opportunities that exist outside of traditional stock exchanges. Rather than buying shares in publicly listed companies, private market investors have access to private companies, real estate, private debt, and more. Private markets offer the potential for unique growth opportunities that can be very hard to find in public markets. For those looking to diversify beyond stocks and bonds, private markets present less volatile but high-potential investment opportunities that are becoming increasingly attractive.

Private markets often have an edge over public markets when it comes to performance. One key reason is the ability to invest in high-growth companies earlier in their development, long before they’re available to the public. This access can lead to outsized returns, particularly in sectors like technology. And now that companies are staying private for longer, by the time they do go public, a lot of the value has already been squeezed by institutional investors. Just take a look at the swath of lacklustre IPOs recently for evidence of that.

Secondly, while alternative assets are valued using “mark-to-market” accounting practices (more on this somewhat controversial topic here), they still avoid the extreme daily fluctuations that public markets face. Why is this important? Because it enables investors to take a longer-term view without being pressured into selling because of negative short-term market sentiment.

Another key benefit of private markets is the ability to invest over a longer time frame. This longer horizon equates to the potential for higher returns, and is commonly known as the “liquidity premium”. Of course, the lack of liquidity itself is a trade-off. Unlike public markets, where shares can be sold quickly, private market investments often lock capital in for years. This illiquidity can be a drawback for those needing quicker access to their funds, but for long-term investors it provides an opportunity to ride out market cycles without being forced into short-term decisions driven by irrational market sentiment.

Private markets offer access to investment opportunities that are simply out of reach for most retail investors. Whether it’s early-stage tech startups, private real estate deals, or even litigation funding, these unique opportunities can offer return potential far beyond what’s typically available in public markets.

Let’s take off our rose tinted glasses for a second though. With this exclusivity comes increased risk. Many of these investments are in unproven or emerging businesses that may not succeed. While the potential rewards are high, so are the stakes, especially if you don’t have a sensible strategy in place. That said, for investors willing to embrace that risk, private markets offer an opportunity to diversify into areas that can drive exceptional long-term returns.

Ultimately, we see private market investments as a powerful addition to an already diversified portfolio, offering uncorrelated growth that complements more traditional assets. Of course though, and as with all investments, thorough due diligence is crucial to ensure you strike the right balance between your own risk tolerance and reward expectations.

What we’ve been working on at Shuttle

• Finishing up a complete redesign of the platform 🎨

• Waiting for the final edits of a video we just shot 🎥

• Started using sender.net for trigger-based marketing automation 📧

• Discovered that rebrands are a monumental IT effort 😅

The Unsophisticated Investor is brought to you by Scott & Rob, the founders of Shuttle. We’re both sick of private markets being a playground exclusive to the ultra-wealthy so we started a company to challenge the status-quo. Shuttle’s singular focus is to unlock private markets for Millennial and Gen Z retail investors and help them build wealth through the highest performing private market opportunities.

Scott & Rob
Shuttle Co-Founders