Openfinance Insights

For decades, investing in private securities was only open to a small pool of qualified investors – until Regulation A+ changed the rules for good.

While investors know that diversification is key in any portfolio, investing in private and non-listed securities has historically been easier said than done. Accessing deals is often challenging, buying a stake requires significant amounts of capital, and liquidating a position is all but impossible for investors.

At Facebook’s annual F8 conference earlier this year, Mark Zuckerberg declared “the future is private” – but is that the case when it comes to investments?

Diversification. Capital appreciation. Protection from inflation. Real estate offers a slew of advantages that make it a natural fit for many investment portfolios. Since these assets aren’t typically tied to daily market ups and downs, investors often incorporate them alongside equities and fixed income. As part of a diversified portfolio, real estate can offer a more stable, long-term investment with the potential to grow in value and produce income, in some cases.

Over the last several years, peer-to-peer payment apps like Venmo and Zelle have made it exponentially easier to transfer money among friends and family. While paying for your share of dinner or the gas bill once required visiting an ATM to get cash or writing a check that took days to clear, it’s now simple to settle tabs instantly with a few taps of a screen.

For sophisticated investors willing to take calculated risks, hedge funds can offer an attractive way to earn active returns while diversifying their portfolios. According to the SEC, there are currently over 9,000 hedge funds worldwide managing $3.6 trillion in assets. These funds pool resources from multiple investors to invest in a variety of related strategies, often betting that one security or sector will rise as another decreases in value. Getting both parts of the strategy right can lead to above-average returns for both the fund and its investors.

What’s in a name? Quite a bit, when it comes to investing.

As the market for digitally formatted securities continues to grow, participants and observers are bandying around terms like “security token,” “digital security” and “crypto asset” to describe what’s happening in the space. That litany of descriptions can be confusing for both investors and issuers as they consider opportunities across the market.

For many up-and-coming businesses, venture capital funding can make the difference between sustainable growth and shutting the doors. Venture capital is a critical resource for early-stage companies, while investors willing to take a chance on these businesses can potentially reap above-average returns. As the startup ecosystem continues to grow, venture capital investment surged to a record-breaking $131 billion in the U.S. last year, with 2019 off to a similar pace.  

“Are digital securities another questionable crypto investment?” “Can I invest if I’m not accredited?” “What do these assets have to do with blockchain, anyway?”

For participants across the alternative asset industry, the rise of digital securities is poised to deliver what’s long been missing from the private securities market: liquidity.