Many companies are staying private for longer before deciding to go public—if they do so at all. But what does that mean for investors? Our Head of Equities, Stephen Dover, says the type of gains many stocks have seen right after their public-market launches could be a thing of the past. He also makes the case that this private-for-longer trend favors active managers who can invest in these companies at a potentially faster stage of growth.

I’m often asked by investors about the advantages that an actively managed mutual fund offers over a passive fund. In light of the recent high-profile initial public offerings of Uber, Lyft and Pinterest, I would call attention to the fact that many actively managed mutual funds have access to companies that aren’t yet listed on a stock exchange.

Many companies today are staying private for longer periods of time before deciding to go public—if they do so at all—and this “private-for-longer” trend has some significant implications for investors and the market.

All US companies start out as privately held—many as small family businesses. As a company starts to grow, often outside capital is needed to continue to expand and fuel the business. Staying private can make raising that capital (that is, finding outside investors) more difficult. However, that challenge isn’t as big as it used to be.

Today, many companies no longer feel the need to list on a public market like the New York Stock Exchange, NASDAQ or other global stock exchange to raise money via an initial public offering (IPO). “New economy” companies in particular are more easily able to obtain funding without going public. So, these companies are often staying private for longer.

Going public can allow a company to quickly raise lots of capital from a large number of shareholders. It also means a company has to answer to those shareholders and follow greater regulatory requirements, and it can cost a lot of money to list.