N E W IN VE S T OR S
THE NEXT FRONTIER FOR PRIVATE EQUITY: INDIVIDUAL INVESTORS
High-net-worth individuals and retail represent a further stage of growth in private equity allocations. The largest fund managers are leading the charge, as regulators watch closely
T
en years ago, private equity giant Blackstone relied exclusively on large institutional investors for its capital. Last year, around 20% of its USD684bn AUM came from individual investors. It could reach around half in the next decade, according to the firm. Co-founder Stephen Schwarzman believes retail is an USD80tn addressable market and other large private equity managers including KKR and Apollo are taking notice too. According to a recent survey by consultancy Oliver Wyman, individuals are expected to allocate an additional USD 1.5tn to private markets by 2025. “When we look at where the large funds are putting a lot of their focus and where they’re building new
teams, it’s [the retail] investors that jump out,” says Peter Witte at EY. “It’s an untapped market and by and large, those markets have been kind of frozen out of institutional commingled funds for a long time.” Banks, particularly in Europe and Asia, have been developing alternatives investment platforms to target the growth in private clients there. Fintech feeder vehicles from Moonfare (started by an ex-KKR executive), iCapital Network (partowned by Blackrock) and others are funnelling huge amounts of retail capital into the most well-known private equity funds. And, more recently, private equity funds are being ‘tokenised’ through blockchain to potentially allow investments for as little as a dollar. In an environment of low interest
rates where more and more companies are shifting into private hands, the owner of Moonfare claimed last year that there is a “political need to open up these markets”. Regulators may have been listening. Last September, an advisory group for the US Securities and Exchange Commission (SEC) recommended making it easier for the less wealthy to invest in private equity. European authorities have also proposed changes to the European Long-Term Investment Fund (ELTIF) which will remove minimum investment and wealth requirements for individuals while also broadening the type of assets fund managers can hold. Throughout the last decade, wealthy families have gravitated
Are fund managers seeking to increase capital sourced from wealth management or retail channels? 7%
42%
51%
Yes
No
Don't know
Source: EY, Survey of fund managers, 2021 P R IVAT E E QU IT Y W IR E IN S IG H T R E P ORT
8
