The Quest for Alpha: Investing in Private Markets

For decades, many retail investors have been content to follow the herd by allocating to pre-set combinations of traditional assets such as stocks and bonds. This was intuitive – stocks for growth, bonds for income and stability, as well as easy – both asset classes trade daily in the public markets.

A New Frontier for Discerning Investors

But for the discerning investor, the pursuit of something more, the pursuit of alpha, is a persistent quest. Alpha is the excess return a portfolio generates above its benchmark and is a true measure of skill and strategic foresight. In today’s financial landscape, generating alpha is more challenging than ever, and a new frontier has emerged: private markets.

Why Private Markets Are the New Frontier

The public markets, once a vast ocean of opportunity, have undergone a significant shift. The number of publicly traded U.S. companies dropped by approximately 33% from 6,917 in 2000 to 4,642 in 2022. This decline is due in part to factors like regulatory hurdles and mergers. In the meantime, the number of private companies has increased. This leaves investors in exclusively public markets chasing the same, shrinking pool of public assets. Combine the convergence of an increased focus over a diminishing pool of assets, and the widespread availability of information as a result of technology, the prospect of generating excess returns or “alpha” by having an “information edge” has rapidly declined.

Private markets offer a compelling alternative. These are investments in private companies, real estate, infrastructure, and more; assets not traded on a public exchange or stock market. They represent a unique opportunity to provide capital to nimble businesses and strategic projects before they become household names. The potential for this type of diversified investment is the opportunity for enhanced returns and a portfolio that is less correlated with the daily volatility of the stock market.

The Trajan Difference: A Curated Approach to Private Markets

At Trajan Wealth, we understand that mastering this new frontier requires both wisdom and discernment. We find opportunities with surgical precision, and we know our clients, which is the fiduciary difference. Our approach to private markets is designed for sophisticated investors seeking opportunities outside of public markets.

• Curated Opportunities
  We provide access to a rigorously vetted network of private investment funds. We seek opportunities in the middle market and do the homework so you don’t have to.
• A Fortress of Diversification
  Diversification is a key aspect of building portfolio strength. Private markets have a low correlation with public stocks and bonds, meaning their performance isn’t as tightly linked to the daily swings of the stock market. By adding private assets, you are building the potential for a more resilient portfolio to help withstand volatility and market downturns.
• Unlocking the Illiquidity Premium
  Unlike publicly traded assets that can be bought and sold in an instant, private market investments typically require a longer-term commitment. For your patience in locking up capital, you will generally find with the illiquidity premium the potential for higher returns.
• The Power of Active Value Creation
  Private equity firms and managers are not passive investors. They actively partner with the companies they invest in, using their expertise to improve operations, enhance efficiency, and unlock value. This hands-on approach is brings a powerful opportunity for growth and can increase a company’s performance, leading to higher returns for investors. This is about being an agent of change, not just a passive spectator.
• Access to Untapped Opportunities
  The number of publicly traded companies is shrinking, while the private market is growing. This is where innovation and growth are happening. Private markets provide access to dynamic businesses and assets, from venture-backed startups and growth-stage companies to private credit and real estate that are simply unavailable on public exchanges. By investing here, you gain a unique advantage, seizing opportunities before they become household names.
• Strategic Expertise
  We focus on the middle-market space, where there is less competition and a greater potential for favorable entry prices.

Key Takeaways for Your Portfolio

• The number of publicly traded U.S. companies has dropped significantly since 2000, while the number of private companies has increased.
• Alpha generation is increasingly difficult in public markets, where competition is high and information is easily accessible.
• Private markets offer a unique path to enhanced returns and diversification potential, providing access to companies and assets not available on public exchanges.

Trajan Wealth empowers investors with a direct, transparent, and highly curated approach to private markets.