Growth equity “an easy concept to grasp” for clients

investmentnews.com:

With an increasing number of alternative investments to choose from, several advisors agree that growth equity is currently the most popular private equity sub-strategy.

For one, it’s one of the easiest to understand, says Stoy Hall, founder and CEO of Black Mammoth.

“Fundamentally, investors understand that one the most,” he says. “They see this company doing well, I want to put more money in it to make money. It’s a very easy concept to grasp as compared to buyouts or secondaries.”

Additionally, Hall says society is at a point in time where clients have been sitting on cash for a long time as during the pandemic, “everyone hoarded cash.”

“With interest rates [right now], there’s just not very many opportunities out there so where else would you start to go? You’d start to go to businesses and companies that are successful and put money into them.”

Zach Gering, managing director at Wealthspire, says an increasing number of investors wanted to own in private companies’ growth, citing Uber as an example.

“That’s why there’s such a big allocation to growth equity, because limited partners who invest in it want that,” he says. “They don’t want boring cash flowing businesses; they want private businesses that they feel like have can grow exponentially.”

Growth equities, Gering highlighted, are part of a well-rounded allocation just like, in the public sense, clients may want to own Google or Home Depot as a value investment.

“If your portfolio is of the size that you can take on the illiquidity of private markets, because private markets are not for everybody, you want to have the ability to have a portion of your portfolio that is small, but in the high risk, high reward camp. That’s what growth equity is and that’s why