Summary

• A structural shift to private markets creates a major investment opportunity in fintech infrastructure.
• The strategy focuses on publicly traded companies building the "picks and shovels" for private trading.
• Growth is fueled by record private capital, advanced technology, and a supportive regulatory landscape.
• This theme targets firms providing essential platforms for compliance, valuation, and secondary trading.

Wall Street's Quiet Bet on the Private Market

When a behemoth like Morgan Stanley splashes out on a firm like EquityZen, I tend to sit up and take notice. Not because it’s a particularly flashy deal, but because it’s a public admission of something that’s been brewing behind the scenes for years. The big banks have finally realised that the most interesting party is no longer happening on the public stage of the stock exchange. It’s moved to a far more exclusive, and potentially lucrative, private venue.

The Not-So-Private Party

Let’s be honest, the appeal of going public has lost some of its lustre. Why would a fast growing tech unicorn want the headache of quarterly earnings calls, activist investors, and the relentless scrutiny of the public eye when it can raise colossal sums of money in private? Companies are staying private for longer, creating a rather awkward problem for their early investors and employees. They’re sitting on paper fortunes with no easy way to turn them into cash.

This is where the real action is. A vast, sprawling secondary market is emerging to provide that much needed liquidity. It’s a marketplace for shares in companies you can’t just buy through your usual broker. And Wall Street, never one to miss an opportunity, is scrambling to build the infrastructure to control it. Morgan Stanley’s move is just one of many. They all want a piece of the action.

Selling Shovels in a Digital Gold Rush

So, where does that leave the savvy investor? Chasing pre-IPO valuations in companies like Stripe or SpaceX feels like a bit of a mug’s game to me. It’s high risk and requires access most of us simply don’t have. A far more pragmatic approach, I think, is to look at the companies building the digital picks and shovels for this gold rush. To me, this is the essence of the Private Market Stocks (Fintech Infrastructure) theme.

Instead of betting on a single company striking gold, the smarter play could be to invest in the technology that makes the entire market possible. We’re talking about the platforms that connect buyers and sellers, the software that handles the fiendishly complex compliance, and the data services that try to make sense of it all. These are the companies providing the essential plumbing for a market that could well be worth trillions.

The Plumbing Behind the Profits

Make no mistake, this isn’t a simple case of building a website. Trading private shares is a regulatory minefield. Valuing a company with no public share price is more art than science. Then you have to manage shareholder records, settle trades, and ensure everything complies with a mountain of rules. It’s a messy, complicated business.

This complexity is precisely what creates the opportunity. The fintech firms that can solve these problems with elegant, scalable technology are positioning themselves as indispensable. They are building the foundational layer upon which this entire new ecosystem will rest. As the big banks pile in, they won’t build all this technology themselves. They’ll buy it or partner with the specialists who have already done the hard work.

A Word on the Risks, Naturally

Of course, this isn’t a one way bet. Nothing ever is. The private market infrastructure space is still young, and it’s not yet clear who the long term winners will be. Competition is heating up, and there’s always the risk that regulators could change their minds, though they seem supportive for now. There’s also the chance that if public markets suddenly become fashionable again, demand for private trading might cool off. As with any investment, your capital is at risk, and you should never invest more than you can afford to lose. But for those with a healthy appetite for risk, the structural shift seems undeniable.

Deep Dive

Market & Opportunity

• Companies are staying private for longer periods, creating a large secondary market for shares.
• Major financial institutions like Morgan Stanley, Goldman Sachs, and JPMorgan are investing heavily in or acquiring private trading infrastructure.
• The private market could potentially become a trillion-dollar market.
• The investment opportunity focuses on the publicly traded companies providing the essential infrastructure, or "picks and shovels", for private market trading.

Key Companies

• Robinhood Markets, Inc. (HOOD): A platform that democratises access to financial markets with a focus on fractional shares and user-friendly interfaces, which could be extended to private market trading for retail investors.
• Social Capital Hedosophia Holdings Corp V (SOFI): A digital-first financial services company offering lending, investing, and banking products, with a technology platform that could capture market share as private markets become more mainstream.
• Fidelity National Information Services (FIS): Provides the core backbone technology that financial institutions use for complex private share trading, compliance, and settlement.

Primary Risk Factors

• The private market infrastructure sector is relatively new, and long-term winners are not yet established.
• Competition within the sector is intense.
• Potential regulatory changes could negatively impact business models.
• The growth in private markets could be cyclical, with demand declining if public markets become more attractive or economic conditions change.
• Many companies in this space are smaller and may be more volatile than established firms.
• All investments carry risk and you may lose money.

Growth Catalysts

• Companies are choosing to stay private longer due to the volatility and regulatory burdens of public markets.
• Record amounts of private capital from venture capital, private equity, and sovereign wealth funds are seeking investment opportunities.
• Technological advancements, including cloud computing, artificial intelligence, and blockchain, enable the creation of platforms to handle complex private share trading at scale.
• A supportive regulatory environment, with bodies like the SEC working to modernise rules, reduces risk and makes it easier for platforms to operate.