Investors demand ‘democratisation’ of private assets

The demand for ‘equal’ access to traditionally unavailable assets like private equity has risen alongside increasing market volatility, as investors search for alternative avenues to safeguard their portfolios.

Claire Smith, Alternatives Director – Private Assets at Schroders, said the popularity of Schroders’ own Specialist Private Equity fund has skyrocketed as investors saw large super funds and the Australian Government Future Fund investing in private equity companies.

“There’s lots of demand. There’s not many funds in that space that we operate, the semi-liquid space, where you get access to private equity but you’re not locking your money up for 10 years,” she said.

The fund also levels the playing field and encourages access to private equity by offering a $20,000 minimum investment amount, compared to traditional private equity funds requiring up to $5,000,000 minimum investment amounts.

“That’s out of reach for nearly everyone, nearly every normal person,” Smith said.

“Having that low minimum and getting added to the wrap platforms which advisers use and can invest at the push of a button, we’re still seeing really steady flows each month.

“It shows that there’s not many funds that can do what we can do when there is a lot of demand from advisers for these types of investments.”

Smith also said this demand for private asset ‘democratisation’ arose after investor sentiment pivoted from considering the performance of companies in the fund last year to how companies in the fund are valuated this year.

“It’s an interesting dynamic. Last year, it was all about ‘What companies have you got in the fund? Show us the performance. Where’s the growth coming from?’ This year, it’s about ‘How are you valuing the companies? What can we expect if the market deteriorates more?” she said.

“I think people are pleased with the resilience of the performance this year. It’s given comfort that private equity is doing what it’s supposed to do, which is not necessarily be uncorrelated from listed markets but avoid the noise and volatility in listed markets.”