We see innovation just about everywhere we look these days, affecting all aspects of the marketplace, including the sorts of deals that are getting done, the way those deals are being financed and the expanding cast of players who are…
We see innovation just about everywhere we look these days, affecting all aspects of the marketplace, including the sorts of deals that are getting done, the way those deals are being financed and the expanding cast of players who are participating – as principles, intermediaries and service providers.
One area where we see change is in the opening of the market to non-traditional investors. Access to alternative investments, including private equity funds, has generally been limited to institutional investors, leaving out retail investors from private equity’s much higher returns. But no longer, according to a recent report from Pensions & Investments. Many alternative investment managers are looking for ways to capture a greater amount of investments from these retail individuals.
Private equity funds, which traditionally require a minimum investment of $1 – $5 million, are coming up with creative ways to aggregate and attract smaller investments. KKR, for instance, announced the creation this past spring of Altegris KKR Private Equity Master Fund, which will accept investments as low as $25K from “accredited investors.”
Other managers are using vehicles such as special purpose acquisition companies (SPACs) and real estate investment trusts (REITs). For instance, TPG-backed Pace Holding Company recently announced a $400 million IPO, offering 40 million units for just $10 each.
The Financial Times has also reported on this trend, noting that despite the greater costs associated with these types of investments, high net worth individuals believe that the promise of greater returns justify paying these fees, even when they are investing via fund of funds that command extra layered fees.
If the greater returns do, indeed, make up for paying higher fees, the benefit to the individual investors is clear. For the money managers however, having access to other types of “more cooperative capital” gives them greater leverage in negotiating with institutional investors, according to P&I.
Will this trend continue? It’s too early to tell how Altegris, for one, will fare. But we don’t expect to see the pace of innovation sweeping through the market diminish, particularly with a model that can be assisted by technology. We’ve seen this happen with crowdsourcing sites for startups (e.g., gofundme.com, kickstarter.com), grassroots election campaigns and, of course, online dealmaking platforms such as Aurigin (formerly BankerBay).
Here at Aurigin, we’re pleased to be directly participating in the market transformation of the investment process with our signature platform technology, which serves as a key resource for market participants on both the buy and sell side.