Private Equity Investments Gain Accessibility for Retail Investors

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Private equity funds can be attractive for smaller investors, but there are certain challenges to consider. One reason for hesitation is the need for knowledge to invest directly in a private equity fund. The performance of different funds can vary significantly, so it is not advisable to invest randomly in the hope of achieving high returns. For smaller investors who lack comprehensive knowledge, investing in a fund-of-funds, also known as a diversified fund, is recommended. Many investors struggle to understand the complex structures of such funds and find the private markets to be opaque. However, the accessibility of private-market funds for retail investors is gradually improving. Platforms like iAccess, Partners Group, Moonfare, and Titanbay allow individuals to invest in closed-ended funds that provide exposure to privately held, non-listed companies. These closed-ended funds have a limited number of shares and are closed to further investments once a certain volume is reached. However, to invest in these platforms, individuals must meet certain criteria, such as having a minimum net worth or professional experience in the financial sector. The minimum investment amounts vary depending on the platform and fund. For example, Partners Group offers products for private investors starting from CHF 10,000, while Moonfare provides access to private equity with entry contributions ranging from CHF 50,000 to CHF 100,000. The goal is to lower the barriers to entry for individual investors, particularly younger investors who are increasingly interested in private equity. Adding private markets to an investment portfolio can change the risk-return profile for investors. While the risk decreases with a private equity investment, the chance of higher performance increases. Over the past decade, private markets have reportedly offered excess returns of between 3 and 5 percentage points compared to listed counterparts. It is important for investors to understand the asset class and the characteristics of each product before making investment decisions.

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