Private Equity for the Rest of Us
A handful of online platforms aggregate pools from less-affluent investors. But is this democratization of investing or a toppy market?
Democracy: Mercury iFunds’ online platform allows advisors to aggregate smaller money pools from less-affluent clients. William Waitzman for Barron’s
The ability to invest in alternative-asset funds like private equity used to be the preserve of sovereign-wealth and pension funds, and high-net-worth individuals. No longer. The “democratization” of PE investing seems to be accelerating.
PE funds are looking down-market to expand capital and fee income by attracting money from less-affluent individual investors. A handful of online alternative-asset investing platforms have sprung up to fill that need and pitch PE investments to folks who previously didn’t have the scratch—typically $5 million and up—to buy in. In general, alternative-asset returns have outperformed the stock market over the past decade.
Mercury iFunds rolled out an online platform last August that allows qualified registered investment advisors, or RIAs, to aggregate smaller pools of money—as little as $100,000—from clients who individually don’t qualify to buy into alternative investments, such as private equity, hedge, or infrastructure funds, among 18 other fund sectors. Fees paid to Mercury might come from the fund manager or the investor, depending on the minimum investment required by the fund.
Mercury follows the iCapital Network platform, which began in late 2014, and offers qualifying RIAs and individual investors access to existing and customized alternative-equity investments that iCapital manages. It has about $5 billion in assets under management.
Of course, just like traditional PE investing, doing it online isn’t very liquid. At best, withdrawals from funds can be measured in months, not minutes like the public markets. Barron’s is all for “democratization,” but the wag in us wonders whether this is just a sign of a toppy market.
—Vito J. Racanelli