At times of market volatility, investing in smaller companies offers investors the opportunity to achieve earnings growth and value outside the FTSE 100. As they look for ways to adapt to the current market environment and preserve their wealth, sophisticated investors are increasingly turning to active investment in SMEs.
In 2015 there were 5.4 million SMEs in the UK. Small businesses are an essential part of Britain's economy and offer an enormous range of opportunity for investment. From the investors' perspective, the question is how to determine which companies deserve closer attention. For listed companies, investors have the advantage of up-to-date information in company reports and market signals from a floating share price. For smaller, unlisted companies, however, the information is much more limited, making the job of researching them that much harder.
The availability of real time data for quoted companies gives investors accurate fundamentals on which to base investment decisions. It's a simple, quantitative approach. By contrast, unlisted companies are generally in an earlier, high-growth phase of development and lack that depth of data, requiring a more qualitative approach.
So is it possible to make an informed decision when investing in SMEs?
Without reliable metrics to fall back on, SME investors need a certain amount of experience to know what questions to ask. Few private investors have the time, knowledge or experience to do this adequately, which is why experienced fund managers are best-placed to spot opportunities.
Fund managers put in the time to review as many companies as possible within their identified investment sector. This gives them a much stronger overview of the market and a greater awareness of particular companies' commercial opportunities and competitive positions. As a result, they are more likely to pick the winners in a given sector and may even already have relationships with companies prior to the investment process.
As well as being able to advise on an opportunity, fund managers are also more likely to be able to secure an investment on the right terms. Their experience and market knowledge makes them well placed to judge whether a valuation is appropriate - something many private investors are ill-equipped to do.
Invest with the experts
The CoInvestor platform is designed to enable sophisticated private investors to co-invest alongside those experienced fund managers. Investors can build a portfolio of direct investments in small, unlisted companies with the security of knowing that they have been pre-vetted by fund managers with the knowledge and track record to make an informed decision.
What's more, we offer total transparency of fees and processes, clarifying the investment process and providing investors as well as advisers with better quality information.
How does it work?
Each investment listed on the CoInvestor platform has been subjected to detailed and rigorous investment processes by the fund manager presenting it.
The fund manager, acting as lead investor, has already committed to proceed with the investment using their own funds. By listing the deal on the platform, they give you the opportunity to join them as a co-investor. You can then decide whether or not to participate based on the information provided.
If you do decide to proceed, all the administration processes are taken care of on the platform and, following your commitment, the fund manager will remain actively involved in monitoring the investment - supporting the company to grow and working towards a successful exit at the right time.
Find out more at www.coinvestor.co.uk.
