Micro Caps vs. Private Equity: Unshackle Your ReturnsMicroCapsvs.PrivateEquity:UnshackleYourReturns

Overview

Micro caps and private equity offer investors exposure to emerging companies with substantial growth potential. But what sets micro caps apart from private equity? 

• Valuations: The equity market correction of 2022 led to a downward adjustment in micro cap valuations, while private equity valuations remain sky-high. 
• Opportunity: The potential for M&A activity, particularly in the Health Care sector where major pharmaceutical companies have sizable cash balances to invest in smaller firms, is significant. 

• Liquidity: With no lock-up period or capital calls and ready access to funds, micro caps provide daily liquidity not available in private equity investments. 
   

Micro cap stocks, particularly in the US, are an often-overlooked segment of the market: smaller companies, often just getting off the ground, running with limited (or even no) earnings, but brimming with new and innovative ideas and seemingly unlimited upside potential. Sound like a private equity pitch? It should! Investing in micro caps and private equities gives exposure to small companies with incredible growth potential. In fact, the return profiles for micro caps and private equity have essentially mirrored one another for more than a decade. But what sets micro cap apart from private equity?