Public vs Private Market, the comparing of public and private markets has long been a debate topic to the question of where to secure one’s fortune. For us, the conversation always comes down to the operative word of our business: liquidity.
The public market’s liquidity is very much a double-edged sword. While the public market can be swayed into fast, lucrative returns, the opposite is also true. With the constant connectivity of the modern-day, people hear about stock news the moment it happens, allowing for knee-jerk decision-making causing markets to crash much faster than they used to. When a system permits investors to all pull out at once, that is when a market is heavily affected. In other words, liquidity = volatility. So while yes the public market has liquidity, the consequences of mass liquidity affects all the stock market as a who, regardless of its performance.
This is not to say the public market does not have benefits. Ask anyone who invested in Zoom in March of this year and they would probably sing praise to the public market until they were hoarse. As well, anyone looking to cash-out of the public sector does not need to wait patiently . Generally liquidity can be achieved inside of 36 hours.
The private markets can see its own share of accelerated growth and unlike the public markets has low liquidity. However, with low liquidity, volatility also decreases. If you think about the price of your house when a major event happens, and the stock market crashes, what happens to the value of your house in that instant? Values of private real estate simply don’t react that fast. To give an analogy, we like to describe the private market as a vessel on the sea, carrying its capacity in cargo. If that vessel were to turn around, it would take a long time and do so in a predictable manner. During that time, anyone on the vessel could make adjustments and changes to reach their suitable outcomes.
If the private market is a vessel, the public market is a windsock that could violently flail at seemingly any given moment with no apparent direction. Sure, the ‘wind’ could be in your favour for now, but if your investments drop by 10% to 12% overnight due to COVID, you do not have the time to react.
Private investments are considered to be an illiquid investment however, ‘illiquid’ does not mean you cannot retrieve your money from the private sector. It simply means time will be required in order to satisfy the liquidity. In the case of your home, in most cases it would take more than 24 to 36 hours to sell, close and receive your funds in your account. Generally, anywhere from 30 to 45 days or more is a typical case for cashing out on your home. For InvestPlus, we have working capital to allow for limited liquidity. Anything more requires planning our cash outlay and timing. Low volatility also allows for private companies to react to unpredictable events and make more calculated decisions as a result of having that time to react. It also helps private companies to grow and leverage the funds raised to create a successful business instead of being in the position of liquidating investment dollars. For instance, in just a six-month time span, InvestPlus REIT has seen a 57% growth in asset value and continue to diversify our portfolio in western Canada. , ‘
Its this disparity of stability between public and private markets that drives government programs to diversify their investments. Look no further than the Canadian Pension Plan, which invests nearly half of Canada’s retirement savings into the private market for better stability. It is worth noting that real estate makes up 40% of the CPP’s private investments — a statistic we hold with pride.
The pattern on display is that when looking to invest in the long term, companies, organizations and individuals alike are leaning towards the private market for a portion of their investment. Some simply do not have the time to monitor their stocks not only on a daily basis but on an hourly basis. Instead chose a market that can react accordingly and is not correlated to the public market.
About InvestPlus Real Estate Investment Trust
InvestPlus Real Estate Investment Trust (IP REIT) is a private real estate investment fund, based in Calgary, Alberta. InvestPlus REIT is a growth-oriented real estate investment trust focused on increasing unitholder value through the acquisition, ownership and management of commercial and residential properties in primary and secondary markets in western Canada. Management has transacted over $100,000,000 in buildings comprising of 23 buildings in the provinces of BC, Alberta and Saskatchewan. The current portfolio is appraised at $49,500,000 and comprised 10 buildings in 5 different cities in western Canada.
For additional information, you are welcome to reach out to InvestPlus REIT directly, however for offering documents and additional information it is best to reach out to Klint Rodgers, the Assoc. VP of Business Development and Registered Dealing in BC, AB and ON with Axcess Capital Advisors Inc., our lead Partner and Dealership as it relates to capital raise across the country. Klint can be reached at Klint.Rodgers@AxcessCapital.com or you can book a Zoom meeting with him through the following link: Book Meeting Now!