Private markets providers are fighting to get selected by private banks and wealth managers, in the race to get in front of retail clients.
Bob Long, chief executive of Stepstone Private Wealth, said there was huge competition to be selected.
“Almost all significant wealth management firms have increased their focus on private markets over the last few years.
“When we go to a private bank, they are likely to have only a few that they are particularly comfortable with.
“With one important private bank, they’ve told us that we’re in contention and they will have their work done on May 31, and they’re planning to select five semi-liquid evergreen funds, and they do the work.
“[Typically] they go through a process, they ask the right questions and we get approval.”
We want to understand what their philosophy and process is, what they’re trying to achieve and how they want to achieve it
Wealth manager RBC Brewin Dolphin is receiving many pitches from private markets funds, and knocking back 90 per cent.
Shakhista Mukhamedova, head of global manager research Europe at the firm, said: “We are obviously aware that pension funds have been selling private markets, and we know there’s a big, big need for liquidity in private markets within asset managers, that means we have to be more careful [when] we select.”
Mukhamedova said on her team at RBC Brewin Dolphin they apply a similar process as they would to other funds, looking at the quality of the investment team.
“[We] see how they perform through various market environments; we want to understand what their philosophy and process is, what they’re trying to achieve and how they want to achieve it.”
Sophisticated investors
Most of these funds are for high net worth, or ultra high net worth, investors and structured as UCI part II funds; many of the LTAFs recently registered with the FCA are for DC pension funds.
The investor funds are intended for high net worth or ultra high net worth funds; proponents say they offer more liquidity and ease of use than the more traditional private market drawdown structures, where investors’ capital might lie idle and then be called upon quickly.
The minimum investment required by RBC Brewin Dolphin on a Sicav fund is $5mn and potential investors have to certify that they are sophisticated investors.
Wealth Club, a private markets platform for retail investors launched last year, also requires its clients to fill in a questionnaire to certify they are sophisticated investors.
Although the minimum investment is much lower, sometimes at around £10,000, but many of the clients are already familiar with the asset class for professional purposes.
Alex Davies, founder and chief executive of Wealth Club, said: “We only want the best people on our platform, but they themselves are picky about where they’re seen and where they want to be listed. Although people are talking about private markets it still very much in its infancy.
“At the moment we’ve got 10 funds from eight managers. Some of these are very big funds and they do their due diligence on us as well as we do our due diligence on them.”
His five strong research team, looks for track record, and years of outperformance.
“We have HG and they consistently deliver fantastic performance – they will specialise in different areas and that’s what the client is investing in.”
The platform so far has £28mn invested in private market funds, and has 13,000 clients.
It plans to launch an Isa for private markets funds later this year, with a Sipp to follow.
The platform started as an outlet for VCTs and EISes, with Davies using his experience as a director at Hargreaves Lansdown to develop Wealth Club, starting in 2016.
melanie.tringham@ft.com
