Hamilton Lane (NASDAQ:HLNE) co-CEO Erik Hirsch visited with CNBC yesterday ostensibly to comment on the forthcoming initial public offering (IPO) of Reddit. The market has widely anticipated the IPO as public offerings have been moribund in recent years, and Reddit is a high-profile tech firm.
During the discussion, Hirsch noted that they are seeing “a tremendous move of retail capital into private markets” because investors want to gain exposure to a broader set of opportunities. Hirsch said that a lot of companies will never go public, and thus, retail needs to seek out private market opportunities.
Hirsch said institutional investors have done “significantly better” than retail investors due to their ability to access private markets. The little guy, retail money, has largely been blocked from accessing this asset class. Individuals accessing private securities have mostly been the realm of high-net-worth (HNW) individuals or family offices. “Better products, better pricing, better accessibility” is helping to open the door for retail investors, he explained. Hirsch stated that private markets have significantly outperformed the public markets in recent years.
“It’s early, but already very significant,” said Hirsch.
The advent of securities crowdfunding has opened up the private securities sector for smaller investors. Securities issued under the Reg CF and Reg A+ exemptions are available to everyone. Securities issued under Reg D are only available for Accredited Investors. There is a movement in Congress to expand the definition of an Accredited Investor to allow retail investors to access Reg D offerings, but it is not certain it will be successful. Unfortunately, the SEC, under the leadership of Chairman Gary Gensler, wants to make Reg D securities more exclusive instead of inclusive, thus blocking the majority of the population, including underserved communities.