A natural rebalancing
It’s worth recognising two industry trends that may naturally go some way to addressing the issue:
- The shift towards stakeholder capitalism, which is seeing large publicly listed companies focus on creating long-term value, has the potential to help public companies improve long-term returns for investors.
- Private companies are adopting some of the characteristics of public companies in areas such as enhanced corporate reporting, particularly around ESG factors, which will increase transparency and perhaps make them more suitable for retail investing in the longer term.
These shifts are subtle and complex, but they could be a sign that private and public capital are becoming more, not less, alike, and are potentially narrowing the ‘opportunity gap’ for investors.
The fact remains that retail investors in the UK find it hard to access private markets. Taking into account the evermore demanding growth from private markets, the continued shift to Defined Contribution pensions, longer lifespans, and the need for families to save significant amounts of money to fund education, you can see the potential pitfalls that would negatively impact the wealth of society at large and widen the wealth gap.
We are already seeing the Government respond with the Kalifa Fintech review, a listing review proposing changes to how the Financial Conduct Authority (FCA) can develop its rule book, and a long-term asset fund framework. Emerging trends in private and public markets to focus on long-term value and ESG may also help rebalance the scorecard. Nevertheless, continued focus by industry and government to make our markets more fit for purpose is essential for the individual investor.