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Since the internet bubble, investment advisors and academics alike have cautioned investors to avoid the IPO market, insisting that IPOs underperform in the long run and ultimately coining the phrase "IPOs are a loser's game." Despite the advice of these experts, an average of $130 billion is raised each year in the IPO market. This paper discredits the notion that "IPOs are a loser's game" with new data that shows IPOs in fact outperform. Further, it examines how and why the IPO market attracts such a significant amount of capital despite forewarnings. This white paper also explains the benefits of incorporating IPOs into the asset allocation strategy and shows that if structured properly, IPOs can add superior risk-adjusted returns to a portfolio.
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