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Investing Ideas
Private companies disrupting the world
Why now may be an opportune time to invest in venture capital
Key Takeaways
- Investing in the growth phase of a private company offers the potential to capture
a meaningful portion of the increase in a company’s value prior to an initial public
offering (IPO). - The number of publicly traded companies has declined in recent decades while
the number of private companies has increased, and many companies are
remaining private for longer, resulting in potentially more value accretion before
going public. - Fidelity has over 15 years of experience investing in private companies across its
suite of mutual funds and accounts, with notable early investments including Meta
(Facebook) in 2011, Spotify in 2012, Uber in 2014, and SpaceX in 2015. - While many institutional investors have allocated meaningful portions of their
portfolios to private markets to meet objectives that may not be achieved through
traditional stock and bond portfolios, retail investors have historically had limited
access to these markets. The emergence of new strategies, vehicles, and platform
technology may encourage access to more optimal allocations, Fidelity has found.1 - Fidelity research has also shown that among alternative investments, venture capital
may offer a compelling balance between solid absolute performance, strong returns
during declining equity markets, and enhanced portfolio diversification.2
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Private companies disrupting the world
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1. Fidelity Investments, “A Study of Allocations to Alternative Investments by Institutions and Financial Advisors,” May 2023.
2. Fidelity Institutional Wealth Adviser, “Alternative Investments and Their Roles in Multi-Asset Class Portfolios,” 2023.
Past performance is no guarantee of future results.
Diversification does not ensure a profit or guarantee against a loss.
Alternative investment strategies may not be suitable for all investors and are not intended to be a complete investment program. Alternatives may be relatively illiquid; it may be difficult to determine the current market value of the asset; and there may be limited historical risk and return data. Costs of purchase and sale may be relatively high. A high degree of investment analysis may be required before investing.
The third parties referenced herein are independent companies and are not affiliated with Fidelity Investments. Listing them does not suggest a recommendation or endorsement by Fidelity Investments.
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