An Emphasis On Technology
The technology sector remains one of the most attractive to private equity investors. In 2013, technology-related transactions grew 14 percent and 2014 is on track for its strongest year since 2007. In fact, according to data from PwC, the deal market through the end of Q3 stands as one of the strongest in years.
The past few years have seen an increase in global investor confidence among companies operating within the technology space, as private equity investors remain optimistic about the ability of these companies to raise capital and achieve favorable returns. In addition, improving capital market conditions have also helped to increase the pace of activity for initial public offerings in the tech sector. For the second year in a row, venture capitalists expressed the most interest and confidence in investing in cloud computing, with mobile technology coming up a close second.
This kind of increase global investor confidence will help innovative companies in the U.S. expand their footprint, which represents a significant investment opportunity as this sector continue to grow down the line.
Regulatory Questions
In addition to an anticipated decision about Title III of the JOBS Act, there are many other important regulatory matters that advisors should be watching closely and particularly those that focus on how how investment advisors handle non-traditional asset classes. At the beginning of this year, the SEC published detailed guidance on the precautions advisors must consider before recommending alts to clients. On top of that, Mary Jo White noted that the agency may soon conclude its two years of private fund focused risk reviews. The agency is also considering revising the accredited investor standard, a decision that could potentially impact all clients invested in private equity.
To stay on the right side of the SEC, advisors must be transparent, consistent, conservative and compliant. Some observers believe that the SEC is trying to send the message to advisors that they should go above and beyond normal due diligence. The bottom line for advisors is, a strong regulatory framework is key.
At both PENSCO and Buttonwood we’ve noted an increased interest in private equity from savvy, self-directed investors. For clients looking for added diversification and additional sources of potential returns, the asset class is especially attractive. While not without its challenges, we see continued opportunities in private equity to come.
Kelly Rodriques is president and CEO of PENSCO Trust Company, and Michael Goering, managing director at Buttonwood Group Advisors.