AA Capital
Comprehensive Investment Services
AA Capital offers a wide range of investment services designed to meet the unique needs of professional investors and individuals seeking exceptional returns.
Secondary Marketplace
Access our marketplace for secondary transactions of alternative investments, providing liquidity for otherwise illiquid assets.
AI Portfolio Construction
Leverage our AI-powered tools to build and optimize your investment portfolio based on your risk profile and financial goals.
Consolidation of Your Alternative Investment
Simplify your investment management with our consolidated view of all your alternative investments in one place.
Understanding Investment Types
Learn more about the different types of private market investments and how they can fit into your investment strategy
What are Pre-IPO placements?
Pre-IPO placement is a private transaction of shares of a non-publicly traded company, which is a fast way for the company to raise capital. Private equity firms, hedge funds, large institutions and ultra-high-net-worth individuals would be the main users of pre-IPO placement.
These investors are subject to a lockup period, which means that investors cannot convert the restricted shares into publicly traded shares immediately after the invested company goes public. In general, investors can transfer the shares to the public after the company listed on the exchange for six months or more.
Reasons for investment
To compensate for the liquidity issue and offer a return to the investors, the buyers of pre-IPO placement can enter the deal at a discounted price. Private equity investments usually give a higher return compared to equities and fixed income. According to research by Cambridge Associates, private equity produced average annual returns of 10.48% over the 20 years ending on June 30, 2020, while the S&P 500 only returned 5.91% over the same period.
For instance, Alibaba held a pre-IPO and sold its shares with the price per share below $60. After its IPO on the first trading day, the stock price per share is closed at $90.
Apart from the low liquidity yet high internal rate of return features, lower volatility risk is another feature of pre-IPO placement while the publicly traded equities usually are exposed to larger price variation. Since the restricted shares cannot be traded on a stock exchange, the valuation of the invested company would not be affected by a large daily variation in the market before it goes public.
Limitation for Pre-IPO placement
The entry barrier of PE investments are generally much higher than the publicly traded equities and fixed income. Thus, usually only institutional investors and high net-worth individuals can afford the entry fees.
Although pre-IPO placement has its own limitations such as lower liquidity, limited information and high entry barrier, investors of pre-IPO placement could enjoy a higher expected rate of return and lower volatility risk as mentioned above.
Compared to the risk and return tradeoff, pre-IPO placement is quite popular among ultra-high net worth individuals and different financial institutions.
Why Alternatives
Discover how alternative investments can enhance your portfolio diversification, reduce volatility, and potentially deliver superior returns compared to traditional asset classes.
What are alternative or private market investments?
Alternative investment is an investment in asset classes other than public stocks, bonds, and cash. Private market investment is one of the most common types of alternatives.
Why private market?
Private market solutions are gaining traction amongst investors in recent years as they can be powerful tools in helping investors achieve growth, reduce volatility, and provide portfolio diversification.
It encompasses a wide range of assets and strategies including infrastructure, real estate and private equity, pre-IPO.
Private market investment is traditionally accessible only to big-ticket institutional investors due to extremely high ticket size. Platforms like AA Capital breaks the hurdle to US$10,000.
Traditional vs Alternatives
| Criteria | Traditional Investment | Alternative Investment |
|---|---|---|
| Asset class | Equities, bonds & cash in public market | Private equity, private credit, private REITs and others |
| Liquidity | High liquidity profile | Liquidity depends on product asset classes |
| Correlation | High correlation to markets | Low correlation to markets |
| Volatility and return | Higher volatility | Lower volatility with higher potential returns |
Public vs Private Market
| Criteria | Public Market | Private Market |
|---|---|---|
| Definition | Markets where securities are traded publicly on exchanges like NYSE or NASDAQ. | Markets where investments are made in companies not listed on public exchanges. |
| Liquidity | High liquidity due to a large number of buyers and sellers; shares can be bought/sold quickly. | Lower liquidity; selling requires finding a buyer, which can take time and may involve complex negotiations. |
| Regulation | Subject to stringent regulations enforced by government bodies (e.g., SEC in the U.S.), including reporting requirements. | Less regulated; companies may not need to disclose financials or operations publicly. |
| Access | Open to all types of investors, including retail investors; shares can be purchased easily via brokerage accounts. | Typically restricted to accredited or institutional investors, limiting access to wealthier individuals or entities. |
| Valuation | Valuation is determined by market forces; stock prices fluctuate based on supply and demand. | Valuation is often negotiated privately; may involve third-party appraisals or valuations based on earnings multiples. |
| Transparency | High level of transparency due to mandatory reporting requirements; regular financial statements and disclosures are available. | Lower transparency; limited information is provided to investors, often only during funding rounds or major events. |
| Investment Horizon | Investors may engage in short-term trading or long-term holding; more volatility can lead to quick profits or losses. | Generally a long-term investment approach, with capital locked up for several years until an exit event (e.g., acquisition, IPO). |
| Cost of Entry | Lower minimum investment amounts; shares can be purchased for relatively small sums. | Higher minimum investment requirements; often involves significant capital commitments (e.g., millions for venture capital). |
| Returns | Potential for substantial short-term gains, but also higher risk of loss; returns can be influenced by market trends. | Potential for higher long-term returns, especially in successful startups, but with increased risk and longer timeframes for realizing gains. |
| Investment Types | Stocks, ETFs, mutual funds, bonds. | Private equity, venture capital, angel investments, real estate, and direct ownership of businesses. |
| Market Hours | Operates within specific hours on trading days; trading can be affected by market sentiment. | No set hours; transactions can occur at any time, often during funding rounds or negotiations. |
Explore and Invest in Private Markets
Diversify your portfolio and enhance returns with a wide-range of Alternative Investments options
Our Methodology
Discover our proven methodology for identifying, evaluating, and managing alternative investments to maximize returns and minimize risk.
"In today's dynamic macro environment, success comes from aligning capital with clear vision—choosing the right tools to express investment views and staying agile to capture new opportunities."
Alan Tse
Chief Investment Officer
AA Capital
"Alternative investment is the catalyst for tomorrow's wealth creation, and in Hong Kong, we see a gateway to harness emerging markets' dynamism, turning volatility into resilience and unlocking transformative possibilities for the bold."
Kavi Harilela
Director
Payment Asia
Frequently Asked Questions
Find answers to common questions about alternative investments and AA Capital's approach.
Alternative investments are financial assets that don't fall into conventional investment categories such as stocks, bonds, or cash. These investments typically have a complex structure, are less regulated, and may be less liquid than traditional investments.
They often require higher minimum investments and fee structures compared to traditional investments and are primarily accessible to institutional investors and high-net-worth individuals.
The most common alternative investment asset classes include:
- Private Equity: Investments in private companies not listed on public exchanges
- Hedge Funds: Actively managed investment pools using sophisticated strategies
- Real Estate: Commercial, residential, and specialized property investments
- Infrastructure: Investments in essential public assets like roads, bridges, and utilities
- Private Debt: Direct lending to companies outside of public bond markets
- Commodities: Physical goods like precious metals, energy resources, and agricultural products
- Venture Capital: Funding for early-stage companies with high growth potential