Are privates the new publics?

Have indices measuring the “total market” become misnomers? As the number of traded stocks fall and public markets shrink, so does the exposure these markets provide to the economy. This look at private equity – “Are private securities the new publics?” – examines the momentum and opportunity for private securities.

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Investing involves risk, including the possible loss of principal.

The views expressed represent the investment team’s assessment of the market environment as of February 2020, and should not be considered a recommendation to buy, hold, or sell any security, and should not be relied on as research or investment advice. Views are subject to change without notice.

Past performance does not guarantee future results.

Diversification may not protect against market risk.

Fixed income securities and bond funds can lose value, and investors can lose principal, as interest rates rise. They also may be affected by economic conditions that hinder an issuer’s ability to make interest and principal payments on its debt.

Equity securities are subject to price fluctuation and possible loss of principal.

Credit risk is the risk of loss of principal or loss of a financial reward stemming from a borrower’s failure to repay a loan or otherwise meet a contractual obligation. Credit risk arises whenever a borrower expects to use future cash flows to pay a current debt. Investors are compensated for assuming credit risk by way of interest payments from the borrower or issuer of a debt obligation. Credit risk is closely tied to the potential return of an investment, the most notable being that the yields on bonds correlate strongly to their perceived credit risk.

An investment in asset-backed securities may involve risks. Asset-backed securities are often backed by a pool of assets representing the obligations of a number of different parties. The rate of principal payment on asset-backed securities generally depends on the rate of principal payments received on the underlying assets.

A sector is a segment of the economy that includes companies providing the same types of products or services. Although companies within a sector tend to be reasonably consistent in their fundamentals, these fundamentals may differ substantially from one sector to another. For example, some sectors are cyclical, rising and falling with changes in the economy while others are defensive, maintaining their strength despite economic ups and downs.

Investment strategies that hold securities issued by companies principally engaged in the infrastructure industry have greater exposure to the potential adverse economic, regulatory, political, and other changes affecting such entities.

Private placements may be available only to qualified institutional buyers, may have liquidity constraints, and may not be suitable for all investors. There is the possibility that securities cannot be readily sold within seven days at approximately the price at which a portfolio has valued them, which may prevent a strategy from disposing of securities at a time or price during periods of infrequent trading of such securities.

Liquidity risk is the possibility that securities cannot be readily sold within seven days at approximately the price at which a fund has valued them.

Investments in small and/or medium-sized companies typically exhibit greater risk and higher volatility than larger, more established companies.

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