iSTOX Academy: What Are Private Capital Markets?

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‘Capital markets’ refer simply to the venues where money flows between those who have capital and want to invest and businesses who need capital to grow.
Public capital markets are open to the general public and offer access to publicly listed companies, such as Tesla, Microsoft and Alphabet, and securities, such as mutual funds and US treasury notes. Some of the more common examples include the New York Stock Exchange (NYSE), the Singapore Exchange (SGX) and the NASDAQ.

Private capital markets, on the other hand, offer access to private companies and securities, such as startups, unicorns, hedge funds and more. While access to these markets has traditionally been limited to investment banks, private equity firms and extremely wealthy and well-connected individuals, iSTOX has expanded access to a far broader array of accredited investors.

What are accredited investors?

The definition of accredited investor varies by country. In Singapore, being an accredited investor means meeting any of the following three requirements:

• Yearly income of at least S$300,000 or
• Net financial assets of at least S$1,000,000 or
• Net total assets of at least S$2,000,000

What are the key private capital markets?

The key private capital markets include:

Private equity

Here, investors provide money in exchange for ownership in privately held companies, including startups, unicorns and other fast-growing companies.

Private debt

Private debt is where investors purchase the bonds and other debt instruments from private companies. These often include small and middle-market companies who can’t issue publicly tradable corporate bonds and who don’t qualify for the funding they need from traditional banks. The private debt markets have grown rapidly since the 2008 financial crisis, largely in response to increased restrictions on traditional banks offering loans.

Private REITs

Another growing segment of the private capital markets involves investments in real estate. These are known as Private Real Estate Investment Trusts (REITs) or private equity real estate funds.

Are returns higher in private capital markets?

While individual investments and asset classes vary, they can be. Alternative assets like private equity have consistently outperformed the public markets over the last two decades, for example. According to Cambridge Associates and selected benchmarks, private equity returned 13.2% per year compared to 6.6% in public equities and 4.2% in fixed income securities over that period. A key trade-off for those considering investing in the private markets, however, has traditionally been the lack of transparency and liquidity. This means investors in most private markets have typically had to invest with a long timeframe, adding significant risk.

How does iSTOX democratise access to private capital markets?

iSTOX is an investments platform that lowers the barriers to entry to private markets and alternative assets while addressing many of its traditional issues, such as lack of liquidity and transparency. Investors can start with as little as S$1,000 in opportunities that traditionally require millions to enter. It is also the world’s very first regulated platform that offers issuance, settlement, custody, and secondary trading of digital securities. It is based in Singapore and is open to all non-US accredited investors and institutional investors.

Singapore-based iSTOX is the world’s first integrated platform for digital securities. Regulated by the Monetary Authority of Singapore (MAS), iSTOX uses proprietary technology to directly connect buyers and sellers. In so doing, iSTOX provides accredited investors with access to previously out-of-reach investment opportunities, including private equity, hedge funds, private debt and more.

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Opening Private Capital Markets To 21st Century Investors