Episode Transcript
[00:00:00] Speaker A: Hi, there. Welcome to another episode of Investment Insight, presented by McKay Wealth Advisory. I'm Bradley Covert, sitting down Today with Brent McKay. Brent, I'm hearing the term private markets thrown around quite a bit. Can you tell us a little about it?
[00:00:11] Speaker B: Yeah. So private markets are basically private investments, where instead of being in the public market, you're buying maybe a specific investment like a piece of real estate or a pipeline or those kind of things. So private market investments don't have the same rigorous testing that public market investments do. So in a lot of cases, when we've seen other firms offer private investments, these investments sometimes aren't liquid, where you can't actually access your money. So you give somebody your money, and it's not like you see in your statements worth $100,000, and you say, I want my $100,000. Well, actually, you can't get your money.
And so there's a movement afoot to make that market more accessible to investors as the number of public companies has dwindled dramatically over the last 25 years.
And so this industry is pushing for those to be in 401ks, but currently, as of 2027, it's expected that half of the investments in private markets will be from retail investors.
[00:01:09] Speaker A: Wow.
[00:01:10] Speaker B: And so the thing we want to encourage investors to be careful with is, hey, a lot of times these investments price a high dividend or a high amount of interest coming back.
And sometimes to get that interest, they'll borrow money against the real estate or against that pipeline to maintain that cash flow. And then when they can't borrow more money, the cash flow stops. And then a lot of times those investments will go out of business. So like any investment, this one in particular, though, requires a little bit more scrutiny, because since it's private, you really need to spend the time looking at the documents, seeing what the upfront costs are, you know, what can you access your money and what the rules are with these investments. And, you know, what are the fees?
[00:01:52] Speaker A: Right.
[00:01:52] Speaker B: You know, because a lot of, like, private real estate might have a fee of 5 or 6% a year in fees, whereas some of the public REITs are maybe 0.3% or 0.2%. So there's a big range of difference here. But we are seeing a huge growth in private markets, and there's a movement afoot to put Those in your 401ks, other investments to give you access to it. But sometimes access isn't always the best thing, and sometimes it could be a great opportunity. So just make sure you do the research.
[00:02:17] Speaker A: Absolutely. Thanks for explaining that. Thank you for joining us today. Be sure to like and follow us on Facebook and YouTube to stay up to date for more educational content from us here at McKay Wealth Advisory. Thanks and have a great day.
