According to Canadian Business “A study out of the Stern School of Business and Harvard University found that private firms grow faster than public ones. The average investment rate among private companies is nearly twice as high as public firms—6.8% compared to 3.7% of total assets per year.”

Canadian Business went on to report that the Stern research found “There are three reasons why private businesses grow faster, the authors write. First, public companies have an “agency problem,” the inherent conflict of interest between executives wanting to create wealth for themselves and doing what’s best for shareholders… The second issue is what the academics call the “quiet life”; managers of public companies sometimes avoid making investment decisions because they don’t want to rock the boat. The third concern is “short-termism” or the focus on short-term profits.”

Greg Tooth, a partner at private equity buy-out firm Equicapita notes, “publicly traded PE investments focus on much larger transactions leaving the so-called SME or small medium enterprise PE market underserved and investors with few options for accessing the returns that can be generated in this segment – my partners and I created Equicapita to be RRSP eligible with a low minimum to allow qualified investors access to SME investments that are difficult to reach through traditional channels. Because of the compelling mismatch between the amount of business owners seeking exits in relation to the amount of dedicated SME private equity capital we believe this space could provide superior returns over the next decade while the imbalance is rectified and the demographic pressures begin to ease.”

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