The Exempt Market in Canada is such a unique space because at this particular moment in time, the majority of people have no idea of it's advantages. I personally have worked in the private investment landscape in Western Canada for the last 7 years and I've watched enormous changes take place through some of the most turbulent times in financial history. I love to share this information and talk about the changes that have resulted because it's brought us to where we are now - which, in my opinion, is a very lucrative place to be.
Now, before I dive right in, I'll just give you a little history to bring you up to speed on the Exempt Market - a very short overview to illustrate how it's evolved into what it is today. Next, I'll tell you about the main advantages to private investing and finally, I'll tell you how you can use all of this to your advantage. It truly is a special time in financial history and my goal is to explain this to everyone that has a desire to build their financial knowledge. It's through these tougher times that the wealthy make large gains and there truly is a solid market that can help you do the same.
The private investment market has been in existence for centuries as people have always looked for capital to fund their ventures. Up until the last decade though, the private investment market was largely only available to wealthy, accredited investors or those "in the know", such as business associates, friends and family. The mid 2000's saw a boom in the market with increasing use of the Offering Memorandum and the ability to participate as an "eligible investor" with lower minimum investment requirements. Then came the huge setback to the world economy in 2008 - 2009 in which many businesses failed, including some in the Exempt Market.
The upside of a calamity though is that it always brings about great change and many learning opportunities for everyone involved. The result in the private investment landscape was a complete restructure of the industry as a whole which has led to a very favorable place for investors to make some considerable returns on their money.
ADVANTAGES TO PRIVATE INVESTING
The advantages are many in this market but here are the 5 main reasons that investors choose to place their capital here:
Investments to Suit Any Type of Investor - With so many different issuers and products available, there are a wide array of companies and investment terms to choose from. You can choose the industry, the company, the length (short to long term), frequency of payments (monthly, quarterly,profit sharing at completion), type of income (interest, dividends, capital gains) and level of risk that best suits you.
Strong Companies and Sound Investments - The issuers that are looking to raise capital in today's market are generally the best of the best. With the new structure and chain of command in the private marketplace, Exempt Market Dealers are under intense scrutiny from the provincial regulators to offer sound, quality products to potential investors. These dealers therefore must perform rigorous diligence on a potential investment and might accept 1 out of every 25 reviewed to raise capital for . The issuers that make it through this diligence are what you have to choose from and that's where you see excellent experience, longevity, great track records and sound plans for a successful investment. These issuers are also regularly monitored by the regulators and offer regular financial updates and annual Offering Memorandum updates. So in terms of timing, now is when you are seeing a rebirth of a market that is very cautious about it's offerings and very few companies that can pass this rigorous diligence to raise capital. The ones that do have great potential to succeed.
A Tightly Regulated, Safe Market - Gone are the days when someone could hang out a shingle and start raising capital from investors. Today's Exempt Market is regulated and routinely monitored by the respective provincial regulators. All changes that have taken place have been instituted to protect investors, both from loss of money and from potentially investing more than they can afford. "Eligibility to invest" and "suitability of the product" are assessed for each investor. You can rest assured that every possible precaution has been taken to make sure your experience here is fair, transparent and informed.
There's Risk But It's Been Well Mitigated - The Exempt Market is considered a high risk market and the main reasons for this are it's lack of liquidity and the inability to sell your securities until the end of the term (which are basically the same thing but bear with me). Unlike stocks or mutual funds which you can buy or sell almost instantly, with private investments you have to commit to the length of time you accepted and realize that you usually can't get your money back early. And if you do want out early for any reason, it is very difficult and many times impossible to sell your securities to another investor or the issuer.
This lack of instant liquidity and inability to sell to other investors are the main components of the market's high risk status BUT...if you can handle those, you can then start to look at the varying companies within the market from lower risk to higher risk. There are some great, experienced companies in this market with strong track records, excellent management and perfect payment histories so painting it all with a high risk brush is relative. If you can live without your capital for one year while it builds interest for you, then you can test the waters of the Exempt Market.
HOW YOU CAN TAKE ADVANTAGE OF THIS MARKET?
And like anything else, this too shall change. As confidence increases and investors come to understand the market more with it's changes and benefits, more investors will return and the rates will decrease accordingly. It's the nature of the business cycle and right now, the recovery stage, is the BEST time to position yourself to capitalize on it.