Retail Investors Can Now Invest in Private Equity Deals Through CapBridge

Sponsored Post by CapBridge – 27 November 2019


Mr Johnson Chen, CEO of CapBridge Pte Ltd

CapBridge is opening up its private capital raising platform to ‘sophisticated retail investors’ for the first time after receiving approval from regulators to do so.

Previously, private equity deals on CapBridge platform were only accessible to Accredited Investors and Institutional Investors. CapBridge is a Capital Markets Services Licensee for dealing in Capital Market Products since 2016.

Why Invest in Private Equity

Private companies are now choosing to remain private longer as compared to their counterparts from previous decades. The number of publicly-listed companies has been on the decline from the late 1990s. Since 2002, the number of listed US companies has fallen from 5,100 to 4,300, according to the latest McKinsey & Company report.

This trend of delayed public listings and a shrinking pool of publicly traded companies mean that retail investors typically do not have access to participate in the early growth stages of a company, which is usually funded by private equity investments.

Founder and CEO of CapBridge Johnson Chen has stated that CapBridge is using technology and intelligent deal-sharing to “lower the barriers” of investing so that retail investors can participate in private deals that were once reserved for Accredited Investors.

The World of Private Companies

Private equity investments are traditionally riskier than investments in publicly listed companies.

To address that, CapBridge requires all retail investors to invest through a “Preferred Access” structure where CapBridge puts together a selection of private equity deals that have a defined exit plan or liquidity plan. The curation is designed to reduce the level of holding and liquidity risks associated with private deals.

Under the “Preferred Access” structure, retail investors will be investing alongside Accredited Investors and Institutional Investors via a Special Purpose Vehicle (SPV).

As part of CapBridge’s measured approach to risk, retail investors may invest only up to S$10,000 per deal with a maximum aggregate investment limit in one (1) financial year of S$200,000 or up to 10% of the retail investor’s net assets, whichever is lower. For context, the typical size of a single private equity investment is at least S$500,000. By setting limits to capital exposure, CapBridge hopes to facilitate access to private deals for retail investors in a responsible way.

Reduced Risk does not mean no Risk

To be sure, the measures above will not remove all the typical risks associated with private equity investments.

CapBridge highlighted risks such as “holding risk”, “concentration risk” and “disclosure risk” that will remain present.

Furthermore, retail investors that own the SPV will not have voting rights. In a statement to the Business Times, Johnson Chen said that private equity deals are “intended more as a financial investment for retail investors.”

Essentially, retail investors are locked in upon investment and will typically only receive an exit on their investment upon the private company going public or being acquired to receive a possible gain from their investment. That’s the biggest visible risk.

Notably, if the private company that is part of the Preferred Access deals decides to list on a private exchange such as 1exchange, retail investors will not able to participate. 1exchange, which is affiliated to CapBridge, operates under a Recognized Market Operator license that only allows trades from Accredited Investors and Institutional Investors to buy and sell shares on a private securities exchange.

Start Accessing the Private Market

Retail investors interested in private equity deals will need to complete qualification criteria on CapBridge platform beforehand to verify themselves as ‘sophisticated retail investors’.

To qualify as sophisticated, retail investors need to satisfy either the “Knowledge and Experience Test” or the “Suitability Assessment Test”. The MAS’ “Knowledge and Experience Test” includes criteria such as a minimum of three consecutive years of relevant working experience in the field of finance over the past 10 years. Meanwhile, the MAS’ “Suitability Assessment Test” will examine the investor’s risk appetite and investment objectives.

In addition, investors will also need to declare their net assets and financial assets before they can qualify.

If you are interested to learn more , head to https://capbridge.sg/ for more information.

 

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