Crossover Investor
What Is a Crossover Investor?
A crossover investor is a public equity market investor who is active in various fragments of the private investment markets. This investor is involved from the non-public company pre-initial public offering (IPO) stage up to, through, and after the IPO. Crossover investors invest in traditional mutual funds, hedge funds, and family businesses among others.
Grasping the Crossover Investor
A crossover investor's goal is to understand the highest returns conceivable by investing in attractive companies at different stages (early, mid, late), for instance, Series B and C funding adjusts, mezzanine debt, or IPO — of the business life cycle. Crossover investing is unique in relation to buy and hold investing, where the investor doesn't trade during the period from when a security is first bought to when it is at long last sold. Crossover investors aim to accomplish high returns in the short term rather than buy and hold investors who are centered more around long-term growth.
Crossover investing strategies will more often than not be well known in the technology industry. Crossover investors will be committed to the company they are investing in and stick with these companies for a really long time. A 2017 CB Insights report on the Top Crossover Investors in HR Tech Companies named Goldman Sachs, T. Rowe Price, and Silicon Valley Bank among the main four in light of their deal activity during 2016.
Crossover Investing in Debt Markets
Crossover investing additionally applies to both public and private debt financing markets. In fixed-income markets, crossover investing depicts institutional investors who take part in both investment grade and non-investment grade, or high yield, securities. In this case, crossover debt is bonds, notes, loans, and other fixed-income securities outstanding from companies that are on the cusp of investment grade. This may be on the grounds that their credit ratings have as of late been downgraded, and they are currently "fallen stars," or on the grounds that they have been recognized as "rising stars" with upgrade potential. The term crossover investor additionally depicts the people who invest in both developed market, (e.g., the United States, European Union) and emerging market (e.g., China, India, Brazil, Russia) debt.
Crossover Investing and Risk
Whether they are active in equity or debt markets, the risk for corporate investors is that a change in sentiment or perceived risk could make investors suddenly pull back from a given market sector. In this case, asset classes and market sectors with a high extent of crossover investors will be presented to the negative impact on valuations and potential financing challenges that outcome from a sudden drop in investors' craving for risk.
Highlights
- A crossover investor is engaged with numerous sections of the private investment markets, from pre-IPO to the post-IPO stage.
- Crossover investors invest in traditional mutual funds, hedge funds, and family businesses among others.
- Asset classes and market sectors with a high extent of crossover investors endure in the event that there is a sudden drop in investors' craving for risk.
- Crossover investors aim to accomplish high returns in the short term.
