Letter to the editor: Private investors should think before leaping back into public equity markets
The performance of 11 companies, dubbed the “Granolas” by Goldman Sachs, helped send European stocks to a record high in February. But despite the positivity, investors should be consciously aware that such a narrow range of companies in both the US (in the ‘Magnificent Seven’ tech stocks) and Europe are driving equity returns.
As we all know, ‘diversification is the only free lunch’ in investing. Private markets provide a complementary allocation to public markets with the potential to reduce this performance concentration.
The fact that companies are staying private for longer, the growth of private markets themselves, and the wider range of asset classes and investment strategies available to investors offers an opportunity to diversify and reduce volatility and to target alpha from other sources.
Thanks to ‘democratisation’ this is more available to private investors than ever before.