London Stock Exchange Group: Private Capital – The New Frontier
In a recent interview, London Stock Exchange Group (LSEG) CEO David Schwimmer discussed the current drought in listings on the London Stock Exchange and the opportunities that private capital presents. Schwimmer, who took over the reins of LSEG in 2014, has been a vocal advocate for the importance of alternative sources of financing.
The Drought in Listings
The London Stock Exchange has seen a significant decrease in the number of initial public offerings (IPOs) in recent years. According to data from Dealogic, the number of IPOs on the exchange dropped by 78% between 2015 and 2019. This trend has been attributed to a number of factors, including Brexit uncertainty, regulatory changes, and increased competition from private markets.
Private Capital: The New Frontier
Schwimmer believes that private capital is the new frontier for growth in the financial markets. He points out that private markets have grown significantly in recent years, with assets under management (AUM) exceeding $10 trillion in 2019. This growth is expected to continue, with estimates suggesting that private capital AUM could reach $15 trillion by 2025.
Opportunities for Investors
For investors, the growth of private markets presents a number of opportunities. Private markets offer access to a wider range of asset classes, including private equity, real estate, infrastructure, and venture capital. They also offer the potential for higher returns, as private companies are often valued at a premium to their public counterparts.
- Broad Range of Asset Classes: Private markets offer investors access to a wider range of asset classes, including private equity, real estate, infrastructure, and venture capital.
- Higher Returns: Private companies are often valued at a premium to their public counterparts, offering the potential for higher returns.
- Less Volatility: Private markets are generally less volatile than public markets, making them an attractive option for investors seeking to diversify their portfolios.
Opportunities for Companies
For companies, private markets offer a number of advantages over public markets. They provide access to longer-term capital, which can be crucial for businesses seeking to grow and expand. They also offer greater flexibility, as companies can maintain control of their ownership structure and avoid the scrutiny of public markets.
- Long-Term Capital: Private markets provide access to longer-term capital, which can be crucial for businesses seeking to grow and expand.
- Flexibility: Companies can maintain control of their ownership structure and avoid the scrutiny of public markets.
- Valuation: Private companies can often secure higher valuations in private markets than they would in public markets.
Effect on Individuals
For individuals, the shift towards private markets could mean more opportunities to invest in alternative asset classes, such as private equity and real estate. This could lead to greater diversification and potentially higher returns for investors. However, it could also mean higher minimum investment thresholds and increased complexity, as private markets are often less transparent and more illiquid than public markets.
Effect on the World
The shift towards private markets could have significant implications for the global economy. It could lead to a more fragmented financial system, with a greater divide between public and private markets. It could also lead to a reduction in the number of publicly traded companies, which could have implications for market liquidity and efficiency.
Conclusion
In conclusion, the drought in listings on the London Stock Exchange presents both challenges and opportunities. While the decline in IPOs is a cause for concern, the growth of private markets offers new opportunities for investors and companies alike. As private markets continue to grow, it is important for individuals and institutions to understand the implications and adapt their investment strategies accordingly.
As David Schwimmer noted in his interview, “The world is changing, and we need to adapt to it. Private markets are here to stay, and we need to figure out how to make them work for everyone.”
