Funds: Private Equity, Hedge and All Core Structures

Chapter 6

Stock Markets and Listed Funds

6.1 INTRODUCTION

Obtaining a listing for a fund is advantageous for a fund manager as it allows marketing of the fund to a wider range of investors. Listed funds are much more liquid than their unlisted counterparts and as such can be seen by investors as a less risky investment with a lower tied in commitment being required.

Listed funds are typically the only way for smaller scale and individual investors to obtain exposure to certain markets and product types, although, as with most listed companies, the bulk of share ownership in listed funds is held by larger scale investors such as pension funds and insurance companies.

The five largest stock exchanges in the world by market capitalization are the NYSE Euronext, NASDAQ, the Tokyo Stock Exchange, the London Stock Exchange (LSE) and the Hong Kong Stock Exchange. The size of market alone does not necessarily mean that it is attractive in the world of listed funds – for example the LSE was regarded as a poor choice for listing funds until necessary reforms were made in 2007.

While it is true that the majority of companies still choose to list on their domestic stock exchanges, the globalization of capital has broadened listing options around the globe. Funds can therefore now shop for a suitable market, with each exchange offering its own particular profile in terms of visibility to investors, strategic focus, disclosure standards, costs, listing timeline, regulatory control and also valuation. ...