Cees Vermaas, CEO at The International Stock Exchange (TISE), explores how TISE Private Markets offers an administration and trading solution to private clients and family offices investing in the private markets.

In recent years we have seen a clear trend for private clients and family offices to turn away from investing into public market equities and bonds and instead, increasingly invest into private market assets.

There are two key problems with this style of investing: It places greater administrative burden on the investors, such as family offices; and it is also more difficult for investors to enter and exit private market investments, which are by their very nature more illiquid.

The good news is that our private markets offering, TISE Private Markets, provides a low-cost, easy to use solution for private clients and family offices to address these concerns.  

Private market investing

According to the JP Morgan Private Bank Global Family Office Report released at the end of April, family offices now have 46% of their investments in private markets and alternatives, including private equity, real estate, venture capital, hedge funds and private credit. Of the 190 single family offices surveyed globally, 26% of their assets were invested in publicly traded investments.[1]

“the family office landscape in 2024 is marked by a decisive shift toward the private markets.”

As EY have explained, “the family office landscape in 2024 is marked by a decisive shift toward the private markets.” This is being driven by a confluence of factors including shifting interest rates, the spectre of inflation, the uncertainty of asset values and the varying economic growth trajectories. Overarching all of this is the concern around geopolitics.

In the search of higher returns, lower volatility and risk mitigation, family offices are reducing allocations in the public markets and diversifying into private assets, whether private equity, direct investment into mid-market companies, private debt, or secondaries markets and especially digital and sustainable investment strategies.[2]

Twin troubles

The difficulty for private clients and family offices is that the administration of assets within private markets requires meticulous oversight and strategic execution. Family offices often employ dedicated teams to manage direct investments, co-investments, and fund allocations. Some are starting to scale up personnel and digital technology to meet the challenges of investing into the private markets but as EY have shown, many are also not yet equipped with the right resources or talent to cope with new reporting and compliance requirements.[3]

"family offices have begun to engage in secondary markets which facilitate the trading of shares in private companies..."

Equally, family offices find that, compared to the public markets, assets in the private markets are by their very nature more illiquid. To capitalize on strategic opportunities and weather economic downturns they need strategies to balance long-term commitments with short-term liquidity needs. As such, family offices have begun to engage in secondary markets which facilitate the trading of shares in private companies, allowing investors to exit positions or unlock capital and manage liquidity and rebalance portfolios.

TISE Private Markets

Both issues can be addressed by TISE Private Markets. Launched in 2023, TISE Private Markets is an innovative administration and trading tool for private clients and family offices to manage their investments in the private markets.

"TISE Private Markets offers a low-cost, fully integrated electronic solution."

Firstly, our service puts family offices in complete control of their private market portfolio by providing a centralised platform for administering the holdings of one or more assets. Secondly, it enables family offices to invite new investors to participate in scheduled auction trading events for these assets. Our disintermediated model means that there are no commissions on trading and with seamless settlement and share registers automatically updating post-auction, TISE Private Markets offers a low-cost, fully integrated electronic solution.

TISE Private Markets enables family offices to address concerns around the administration and liquidity of private market investments and in doing so, it has the potential to further catalyse private client and family office participation in the private markets.

This article was originally published in Business Brief, June 2024

[1] https://www.cnbc.com/2024/04/29/family-offices-look-beyond-stocks-for-higher-return-less-volatility.html#:~:text=Large%20family%20offices%20have%20nearly,according%20to%20a%20new%20study

[2] https://www.ey.com/en_lu/wealth-asset-management/the-future-of-family-offices--a-look-ahead-to-2024

[3] https://www.ey.com/en_lu/wealth-asset-management/the-future-of-family-offices--a-look-ahead-to-2024