Charles Schwab acquires Forge Global to open private markets to retail investors
Charles Schwab (SCHW) announced that it has acquired the fintech company Forge Global (FRGE) in a deal worth $660 million.
Schwab’s acquisition of Forge will allow it to begin offering private market access to accredited retail investors and the clients of financial advisors.
The private markets have historically been reserved for institutional and other sophisticated investors because it is a space that is notoriously more challenging and riskier.
Schwab noted that in addition to Forge’s private market platform, it also brings its own proprietary data, which is especially important in order to create more transparency in the opaque market of private companies.
JPMorgan Chase noted the challenge of investing in this space when it launched its own private market data solution for institutional investors last year.
“The lack of a single, standardized source for private markets means investors are left with incomplete and fragmented data that is difficult to analyze,” the company said.
“The process of manually extracting and integrating data from unstructured sources is time-consuming, costly, and error prone.”
Forge has bought and sold more than $17 billion in private company shares, according to Schwab. The company is also set to issue interval funds designed to broaden access to private market exposure through lower costs and reduced minimums.
“Our acquisition of Forge builds on more than half a century of Schwab innovating on behalf of individual investors, advisors and employers,” said Rick Wurster, president and chief executive officer of Charles Schwab.
“Through Forge’s leading marketplace, we’re uniquely positioned to deepen liquidity, improve transparency, and further democratize access to this increasingly important source of wealth creation for investors.”
“Schwab’s entry into this space also gives private‑share issuers more choice and liquidity for founders, employees, and early backers,” Wurster added.
Capital markets are on the hunt for retail money
Schwab has been making a push to offer alternative investments to its qualified retail clients, including the recent launch of its Schwab Alternative Investments Select platform.
The firm notes that the private wealth capital allocated to alternative asset classes is expected to grow from $4 trillion today to $13 trillion by 2032.
It is expected that asset management firms will increasingly look to give retail investors access to private markets and other alternative investment sectors because there is a growing push from capital markets to bring in retail money.
“Retail investor capital within private markets represents one of the biggest new growth frontiers in the industry,” Moody’s said in a report from this past summer.
One of the big drivers for this is the fact that companies have been waiting longer to pursue IPOs in recent years, which is redirecting money away from the public markets.
“Private markets are becoming increasingly important to the expansion of global capital markets, in particular, as public listings fall and more companies opt to delist or remain private,” Moody’s said. “To facilitate growth, asset managers and their partners are innovating new structures to provide points of access for private wealth.”
Retail investors are becoming more important “as institutional investors bump against capacity constraints in their alternative investment allocations,” the firm noted.
Forge CEO Kelly Rodriques said in a statement that the two companies are transforming “how the private market works.”
“With Schwab’s reach and Forge’s solutions, private companies will gain access to liquidity and new growth options from an expanded market of qualified retail investors, while investors will gain new ways to invest in the innovation economy,” Rodriques said.
Forge’s stock has surged 215% this year.