Key moments in history of Alternative Investments

1958: US Small Investment Act  📜 

Enables the creation of VC and PE fund structures.
 

With the passage of the Small Business Investment Act of 1958, licensed by the Small Business Administration (SBA), the Small Business Investment Company (SBIC) program was created.

SBICs are privately organised and privately managed investment firms that provide venture capital to small independent businesses. These loans, which are available both to new and established businesses, consist of funds borrowed (at favorable rates) from the U.S. government or from the lending institutions’ own capital stock.

This SBIC program was basically designed to assure that there are institutions within the marketplace able and willing to facilitate the capital needs to the small business community.

1972: Sequoia Capital founded 🌿

Leading Venture Capital firm.
 

There could definitely be worth mentioning a lot of other important VC firms, however, Sequoia Capital left an important mark in history, that last until today.

Sequoia opened for business in 1972, when Don Valentine, a sales and marketing executive in Silicon Valley’s chip industry, decided to try his hand at venture capital.

Along with other partners who joined, Sequoia famously participated in Apple’s initial public offering in 1980, and made early investments of other companies that would later provide great returns for the company such as Oracle, CiscoYahooGoogle, and LinkedIn. Their investment success lead them to having a $1.4 trillion combined stock market value in 2014, which was equivalent to 22% of the NASDAQ at the time. They have invested in over 1000 companies since 1972.

Earlier this year  Sequoia Capital announced that it is opening a fundraiser for about $7bn for its latest set of venture capital funds, testing investor appetite for technology start-ups in the US and south-east Asia as a response to the coronavirus market damage.

1985: Blackstone founded 💵

Leading private equity buyout firm.
 

The now largest alternative investment firm in the world, was founded in 1985 by Peter G. Peterson and Stephen A. Schwarzman, who had previously worked together at Lehman Brothers.

From the outset in 1985, Schwarzman and Peterson planned to enter the private equity business, but had difficulty in raising their first fund because neither had ever led a leveraged buyout. Blackstone finalized fundraising for its first private equity fund in the aftermath of the October 1987 stock market crash. After two years of providing strictly advisory services, Blackstone decided to pursue a merchant banking model after its founders determined that many situations required an investment partner rather than just an advisor.

Blackstone later on in 2007 became a public traded company, with a $4 billion IPO, becoming one of the first major private equity firms to list shares in its management company on the public stock market.

 

1999: Financial Modernization Act 🏦

Enables the rise of large investment banks.

 

The Financial Services Modernization Act—or the Gramm-Leach-Bliley Act—is a law passed in 1999 that partially deregulates the financial industry.

It enhance the competition in the financial services industry by providing a prudential framework for the affiliation of banks, securities firms, and other financial service providers.

Many of the largest banks, brokerages, and insurance companies desired the Act at the time. The justification was that individuals usually put more money into investments when the economy is doing well, but they put most of their money into savings accounts when the economy turns bad. With the new Act, they would be able to do both ‘savings’ and ‘investment’ at the same financial institution, which would be able to do well in both good and bad economic times.

2007: ASSOB Founded 💡

First ever equity crowdfunding platform.

 

The term equity crowdfunding is often used to describe crowd investing into both debt and equity based instruments when they are offered on an equity crowdfunding platform.

The first known equity based crowdfunding platform was launched in 2007 in Australia, called the Australian Small Scale Offerings Board (ASSOB). It now trades as Enable Funding, a securities licensed equity raising platform that has raised over $150 million for 176 private companies.

2008: Global Financial Crisis 📉

Start of a global recession.

 

Excessive risk-taking by banks combined with the bursting of the United States housing bubble caused the values of securities tied to U.S. real estate to plummet, damaging financial institutions globally, culminating with the bankruptcy of Lehman Brothers on September 15, 2008, and an international banking crisis.

The UK and US economies were both geared towards consumer spending, partly financed through the rising house prices. The recession played a role in steering the economy in a different direction.

Along with the implementation of heavy regulation, the crisis also bolstered the technology sector and Silicon Valley’s roles in the economy while downplaying Wall Street’s dominant presence.

2010s: New Financial Regulation ✍️

Reshapes the financial and investment industries.

 

The ten years following the Global Financial Crisis of 2008 can be characterized as the decade of financial regulatory reform. New rules ouch virtually every financial firm, from banks to insurers to asset managers to mortgage lenders and more. Most importantly, these rules have reshaped the regulatory environment governing a wide range of asset management products and activities, thereby creating a “safer neighborhood” and improving conditions to invest with increased confidence.

The overall effect is broadly positive for strengthening financial systems around the world and reducing the potential for systemic risk events.

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