Demand among Asia’s rich for tech investments has led Hong Kong-based broker CLSA to offer private bank clients the first broad access to unlisted so-called “unicorns” via fast-growing secondary markets.
Traditionally, unlisted companies including unicorns – private companies with a value of more than $1 billion – have been the preserve of private equity and other big fund managers who could bet hundreds of millions on individual companies.
But the growth of unofficial secondary markets to trade small slivers of those unlisted stocks offers an opportunity for smaller investors, according to CLSA, the international arm of Chinese state-owned Citic Securities.
CLSA will provide the wealthy, through their private banks, exposure to a diverse set of unicorns via various formats, including private investment funds and managed accounts, among other options.
CLSA says it is the first to offer such diverse access to private companies so widely in Asia.
“Investing in this asset class has traditionally involved sizeable commitments, high concentration risk – and high fees,” said Jeremy Collard, CLSA‘s head of structured investments.
“The fast-evolving market for private secondaries now enables us to build broad and diversified portfolios.”
Private companies have typically carefully controlled their shareholder registers, but pressure has grown to allow more trading because so many are staying private for longer than previously anticipated, delaying shareholders, including employees, the chance to capitalise via an initial public offering.
CLSA is partnering with Gateway Private Markets, a Hong Kong-based firm specialising in secondary market trades, to provide access to the shares.
CLSA‘s move comes, however, as start-ups and unicorns globally face challenges amid the coronavirus outbreak that has paralysed businesses and economies.
Valuations of several Chinese unicorns in secondary market trades have this year fallen below the levels reached in the firms’ most-recent fundraising rounds.