Private placements are commonly offered by private companies intending to raise capital through the issuance of securities. The securities may take one of many forms, including shares, limited partnership or trust units, promissory notes, bonds, equity interests in land, or mortgages. An important part of our mandate is to seek out these types of offerings in order to provide our clients with access to this segment of the market.
These offerings tend to have a higher risk/return profile, and are not suitable for all clients. They tend to be more appropriate for accredited investors having substantial investable assets, as these clients typically want access to investments with limited connection to the volatility of public markets.
Investments of this type can be quite illiquid, with hold periods ranging from three to six years, and there are usually few [if any] distributions of income as the issuers are typically in some form of growth or acquisition mode. Not all offerings are identical, but investors should consider these offerings for their “risk capital”, with the majority of their investable assets being placed in more liquid securities or in a managed account with a portfolio manager.