Since the beginning of the year, the S&P 500 has been down as much as 14%, and the Nasdaq has dropped as much as 21%.
That begs the question: Where did all that money go?
Most people see market sell-offs like that and panic. What they don’t realize is there’s another side to the trade.
Because hedge funds and big institutions aren’t stashing their profits under the mattresses…
They’re moving it into another opportunity: Private markets.
In 2021, the pace of new unicorns (a unicorn is a private company that reaches a billion-dollar valuation) increased considerably, reaching an average of two new unicorns minted per day.
Companies on the unicorn board are currently valued at $3.4 trillion on average… That’s a $1.4 trillion boost in value in less than a year.
This growth is partly due to the private market being a different ball game than public markets.
It’s completely disconnected from publicly traded stocks… so it’s not affected by the volatility caused by inflation and geopolitical uncertainty.
That’s why I believe we’ve seen so much public market capital flow out of stocks and into the private markets.
According to Fortune, more than 80% of venture capital (VC) and private equity firms say they plan to raise capital in 2022. That’s up from 75% in 2021.
And the amount of money they’re raising is increasing. In 2021, private equity funds raised at least $733 billion globally, surpassing every previous year on record.
This year they’re forecast to raise $952 billion.
Now, with everything going on in the world, I know it’s hard to focus on ideas like private markets. People are too busy worrying about rising food and gas prices.
But I can tell you – without a shadow of a doubt – hedge funds and VCs haven’t stopped looking for opportunities. In fact, they’re taking advantage of it…
Why Hedge Funds Like Private Companies
The rush from the public markets into the private markets makes sense when you consider the following:
Unlike public companies, market swings don’t affect the share prices of private firms. In fact, the prices of the companies we recommend in our private investment newsletter have remained stable since the outbreak of the war.
The best private companies built up substantial war chests before the pandemic. They can use that money to buy distressed assets on the cheap. And I expect them to continue the same during this conflict.
If the market stays volatile, companies can remain private until the conditions are more favorable for a public offering. So private companies have tremendous flexibility.
Studies by research firms like Blackstone and KKR show that private companies not only outperform the S&P 500… they also have lower volatility than publicly traded companies. And they perform better during challenging times.
These are all great reasons to consider private investments when the market is churning.
But what I really like about private equity investing is it beats investing in companies after they IPO.
Take Uber, for example. It’s down 23% since the beginning of the year. In fact, retail investors who invested on IPO day are down 28%. But pre-IPO investors are up 197%.
Or look at exercise equipment maker Peloton. At $26, it’s down about 3% since its $27 IPO-day price. Yet pre-IPO investors are sitting on gains of about 537%.
And then there’s language-learning software developer Duolingo. It’s down 35% from its IPO day price. But pre-IPO investors are up 1,426%.
As you can see, current volatility has wiped out billions of dollars’ worth of capital in these public companies. But those who bought them when they were private are still up triple and quadruple digits, despite the pullback.
That’s the beauty of pre-IPO investing.
A Breakthrough Pre-IPO for Just $1.25 per Share
Recently, through my contacts, I’ve found an incredible private deal that will benefit from the geopolitical uncertainty we’re seeing now…
We’re also not alone in thinking this company has huge investment and economic potential.
After vetting this private company… a Wall Street powerhouse wrote a check to become its largest shareholder.
This titan’s deals are some of the most profitable opportunities of the past 150 years… including returns of 47x, 100x, and 159x.
That’s why at 8 p.m. tomorrow, I’m holding my U.S. Energy Independence Summit.
During this special briefing, I’ll tell you what this company is… the technology it’s using to create low-cost energy… and the Wall Street powerhouse behind it.
Best of all, you’ll learn how to get shares for just $1.25… no accredited investor status needed. And the minimum to get involved is $500.
But like my past private deals, shares are strictly limited…
So it’s critical you join me tomorrow at 8 p.m. ET. One of my last private deals closed in 12 hours… and I wouldn’t be surprised if that happens again.
Friends, the geopolitical uncertainty we’re seeing today isn’t stopping VCs and hedge funds from jumping on opportunities in the private markets like this tiny energy company.
And it shouldn’t stop you either.
Let the Game Come to You!
Editor, Palm Beach Daily