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Public companies are traded publicly on the stock market and invested in by the general public. Private companies are owned by individuals or specific shareholders, and shares are not available to the public to purchase. The funding for private companies comes through institutional investors rather than the stock market or the general public.

In recent years, there has been a rise in investors in private markets. The UK private equity investment is currently at its highest level for five years. It has resulted in numerous private companies raising more amounts of capital. Then, they wait longer than usual before going public.

The private sector is considered the engine of economic growth. Among numerous other things, it has contributed to technological advancements in vital sectors. These include transportation and energy – both impacted by the rise in demand for more sustainable businesses. The private sector has also helped to increase life expectancy through innovation in healthcare.

Benefits Of Operating In The Private Sector

Private markets have structural differences from public markets. While the downside of these differences is frequently discussed - there are benefits as well. Benefits such as these are some of the reasons why more companies are opting to stay private.

The Private Markets Are Unregulated

Being unregulated can bring significant risks to companies. However, it can also provide significant opportunities. The information about investments is not regulated. There is nothing in place to regulate the forms and structures of either due diligence materials or financial statements.

To succeed, investors must be prepared to collect their own data sets and evaluate opportunities for themselves. There are great opportunities for investors to leverage these market dynamics to their benefit. In addition to this, they can also earn significant financial returns.

Provide More Accurate Information On A Niche Market

Due to the information in the private sector not being regulated, there are opportunities to collect an abundance of accurate information, especially on a niche market. They will then have more information, especially compared to others in their sector, helping to remain one step ahead of competitors in their industry. With this additional information, these companies will have a top-down view of all buyers and sellers, especially those in a particular market. Once they know this, they can use it to invest with a favourable risk or return profile.

Individual Opportunities To Grow

For those with extensive knowledge of the rising private market sector, it helps to put them in a great position ahead of competitors. For those wanting to learn more about private market investments and alternative investment management, there are courses available where you can earn a certificate online. Some of these courses focus on investment management and alternative investments. In addition to gaining deep insight into this emerging sector, it can show potential employers or future partners that they are well-versed in alternative investment management.

Greater Control Over The Business

Many companies choose to stay private to obtain greater control over their business. Remaining private allows the business to stay in the hands of a select few people, including family members. Companies that choose to be private also are not obligated to fulfil the ideas of shareholders.

Private companies are not subjected to the volatility that comes with being a publicly-traded business. The highs and lows of the stock market are an accepted cost of doing business for many investors; however, they can easily become a distraction for the business, which is especially true in instances where employees are shareholders. Without worrying about what the stock is doing and what it could mean for their finances, employees can focus on their jobs, rather than the numbers.

Private Markets Can Navigate Rising Inflation Expectations

The return of inflation has presented investors with a challenge. Searching for yield should now be coupled with the need to protect against inflationary trends. There are various strategies in private markets that look to be well-positioned to provide that hedge. They could even flourish if higher inflation were to persist. In addition to this, the geographical spread of private-market strategies can help investors diversify across economies at different phases in the inflationary cycle. However, some private-markets strategies are fixed rates with long duration. As such, they may not necessarily underperform in an inflationary environment, especially if actual inflation does not exceed market expectations for inflation.

Why Firms Should Consider Private Market Investing

Private market investing, often used interchangeably with private equity, provides investors with a robust opportunity. Many companies in today’s corporate landscape are staying private for longer. They choose to go public when they are at larger sizes. Due to this trend, more investors are interested in participating in the private markets. These investments require a different mindset and strategy. Here are a few things worth considering before investing in private market investments.

The Future Of The Private Market Sector

Most private-sector figures follow the rules of the system. However, there is a growing number of entrepreneurs that are choosing not to play by the rules. Instead, they are looking at working to change them. Some are even aiming to transform the purpose of business and the economic system itself. They are looking to help with social and environmental issues. Additionally, working with governments and other stakeholders to advance sustainable development, and transform systems that have led to climate change and unsustainability.

In future, investors should integrate private strategies that operate in less efficient markets. It will help to exhibit more growth and more opportunities to generate dominance. To do this effectively, investors and their advisors must adjust their mindset from seeing alternatives as additional exposure, to viewing them as being core holdings in a portfolio.

The future of the private market sector looks promising. For many companies, now is an ideal time to learn more about alternative investments. Also, now is the time to find out ways to succeed in the private market sector. Taking the time to understand now will help them be ahead of their competition in the years to come.

BlackLine commissioned independent global research firm Censuswide to survey over 760 institutional investors across the world to establish their attitudes to financial risk, due diligence and reporting. The findings reveal the financial practices that raise red flags for investors, as well as the factors they rely on to make informed investment decisions.

According to the survey, creative accounting, where companies exploit financial loopholes to present figures in a legal though misleadingly favourable light, was identified as a major concern for the global investor community. Not only do the majority of investors believe that these tactics are commonplace at their portfolio companies, but 91% believe that more large companies will resort to these techniques over the next 12 to 18 months.

Worryingly, 83% of investors surveyed also agreed on the likelihood of a global recession in the next 12 to 18 months, meaning businesses will need to work even harder to outstrip the competition. However, companies should think twice before trying to manipulate their figures; a quarter (25%) of investors singled out evidence of creative accounting as the factor that would make them least likely to invest in a company.

“In many ways the international business landscape is more complex, uncertain and challenging than it was a year ago. Companies are therefore under increasing pressure to perform and retain a competitive edge,” said BlackLine CEO Therese Tucker. “However, businesses cannot afford to have the integrity of their financial data questioned at a time when investors are evidently becoming more stringent about unnecessary and unwarranted financial risks.”

In fact, inaccurate reporting and poor financial controls raise alarm bells for a large number of global investors. Less than 1% of those surveyed say they will invest in a company with poor financial controls without taking some form of corrective action first, such as imposing changes on the company or its management team.

A third of investors (33%) say risk of internal financial fraud or financial non-compliance make them less likely to invest. Meanwhile, a quarter (25%) are put off by consistently late filings, with a slightly higher portion less likely to invest in companies that make adjustments post reporting (29%).

These red flags are encouraging investors to take a much closer look at the numbers, highlighting the importance of accurate and transparent financial data. When asked what the most important considerations were when deciding whether to invest, a company’s financial growth forecasts (46%), access to real-time snapshots of company finances (42%) and key metrics within financial reports (46%) came out on top. This suggests that while investors are forward-looking, they also need a clear and realistic view of current financial data in order to make informed decisions.

“It’s likely that investors will increasingly want to look ‘under the hood’ of their portfolio companies, to ensure they are getting a transparent and accurate view of their finances,” continued Tucker. “The ability to access, and more importantly analyze, data in real time will not only be vital for driving business competitiveness, but also for maintaining investor trust.”

The full findings are outlined in ‘The New Age of Increased Investor Due Diligence’.

China's technology industry is developing into a serious rival to Silicon Valley, but there are political hurdles ahead. Bloomberg QuickTake explains how China's tech companies went from copycats to cutting edge, and why the US government is crying foul.

The top 5 biggest real estate companies in the world. We take a look at the top 5 biggest real estate companies in the world, and compare figures such as profit, sales, market value and assets.

FinTech companies have been the foundation of innovation in the payments and financial services sphere over the past decade, whilst legacy financial institutions, such as banks, have struggled to keep up. Generally considered in competition with one another, what would happen if FinTechs and Banks joined forces? Prabhat Vira, President of Tungsten Network Finance, explains.

Recent research shows that financial institutions are increasingly forming partnerships with fintechs to create products that streamline and improve the customer experience and eliminate inefficiencies. In fact, when questioned by PwC, 82% of banks, insurers and asset managers said they expected to increase the number of fintech providers they work with over the next 3-5 years. So what is driving this trend and how can commercial banks follow the lead of their retail counterparts?

A symbiotic relationship

Over the last few years, fintechs have evolved the customer experience – prioritising the user experience to connect with and empower customers with alternative finance. Many banks are coming to the realisation that if there is a great opportunity to participate in fintech developments.

In light of this, instead of competing with fintechs, some banks are seeing the wisdom of embracing the dynamic nature of fintechs and are actively collaborating with them. It is a very positive step forward as each party has something significant to offer the other. Fintechs require access to capital, and Banks in contras, are looking for ways to innovate more quickly, provide a slicker customer experience and leverage data to mitigate risk. Collaboration with fintechs enables banks to outsource their R&D to them and bring new products to the market much more quickly and for less cost. Ultimately, the partnerships between banks and fintechs are creating a unique opportunity for the expansion of finance solutions, and thereby adding real value for customers.

Commercial banks following retail counterparts

However, this subject is not purely theoretical for us – we have recently teamed up with BNP Paribas, a leading international bank, to offer e-invoicing linked Receivables Purchase and e-invoicing linked Supply Chain Finance (e-SCF) to large corporates in the USA and Canada. Our customers can now obtain an attractive working capital solution through the same technology provider they use for e-invoicing and procurement activities. It is the first partnership of its type and a sign that commercial banks are following the lead of their retail counterparts in collaborating with fintechs.

By linking e-invoicing with supply chain and receivables purchase, customers are offered a one-stop solution that brings together process efficiency and working capital optimisation in a single portal. They are offered attractive rates in a straight-forward, hassle-free way. From the bank’s perspective, a lot of energy can be spent connecting clients and on the payables side, on-boarding suppliers onto the system. This creates friction in the relationship, and inhibits the supply chain. The advantage for a bank and for the customer is that by partnering with a fintech like us, these trade flows are already on our platform. Therefore, both do not have to onboard suppliers twice and deal with complex technology integrations. Ultimately, the partnership helps to make the supply chain process smoother for all.

We believe partnerships such as this are shaping the future for businesses and financial institutions alike. They are enabling us to work more smartly and offer added value to customers. Speed to market is of the essence in our fast-paced, consumer-centric world and fintech providers are agile by nature and best placed to bring innovations to the masses. As retail and commercial banks realise the mutual benefits of partnering with fintechs, we are certain we will see more and more collaborations that will delight customers around the world.

budgetA joint report from Brand Finance with the Chartered Institute of Management Accountants (CIMA) shows that companies have more than $1.58 trillion (€1.5 trillion) of assets unaccounted for, and calls for valuation of the UK’s ‘intangible assets’ and a debate about policy change.

Unveiled at this morning’s The Value of UK plc event, hosted by CIMA and leading valuation consultancy Brand Finance, the Global Intangible Finance Tracker (GIFT) report highlights how a collective blind spot for business decision makers and policy makers has been allowed to develop.

The comprehensive annual study of 58,000 companies across 120 stock markets, reveals that since 2012 undisclosed intangible value has grown 50% to $27 trillion (€25.5 trillion). It now accounts for more than a third of the average firm’s enterprise value, rising as high as 70% in sectors such as pharmaceuticals and advertising. It also shows that failing to account for intangibles favours short-term economic gains over long-term value and undermines service-sector dominated economies such as the UK. According to the report, failure to effectively account for intangibles risks the undervaluation and acquisition of strong brands such as Cadbury’s or Astra Zeneca.

David Haigh, CEO of Brand Finance said: “This report challenges those leading the debate on our national economic policy. This is an issue which needs a speedy resolution to avoid further national treasures like Cadburys being left to the mercy of foreign buyers and taken over for less than they are worth.”

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“The issue of inaccurate intangible asset value reporting rose to prominence in the M&A boom of the 1980s. After 30 years of arcane debate among accounting standard setters, and despite huge strides being made in valuation techniques and standards, we enter the next great M&A boom, of which the huge BG, Shell deal is just the latest example, with financial accounts which still fail to explain intangible asset values to stakeholders.”

Charles Tilley, CEO of CIMA added: “It is time for the implicit acknowledgement of intangible value to be made explicit. Value is worth that can be exchanged, this depends on a fair exchange of information between the two parties leading to fair valuation for buyers, sellers, investors and wider society. The new global management accounting principles provide a framework for communicating an organisation’s true value and consequently they help UK businesses get a fair deal at the negotiating table.”

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