How one firm is tackling the retail channel

A conversation with PM Alpha this week provided an interesting insight into the ways in which retail capital is being accommodated, as private debt – and private markets in general – reaches beyond its institutional investor comfort zone in the hunt for capital.

PM Alpha is a UK-based digital marketplace whose chief executive officer, Tom Douie, was global head of distribution at private debt fund manager Muzinich & Co prior to founding PM Alpha around a year and a half ago. The firm has just launched what it describes as a “mini blend” product, which gives investors that the industry refers to as ‘qualified retail’ – and who can commit at least €125,000 – access to three distressed and special situations strategies: two from Oaktree Capital Management and one from Apollo Global Management. The product is being pitched to wealth managers and independent financial advisers.

The “mini blend” concept, which might almost be seen as a “mini fund of funds” is designed to offer some degree of diversification – through, for example, different investment periods and different amounts of income generation – but not to the point where the product becomes too generic, which is a criticism that Douie thinks can be levelled at some funds of funds.

The product, rather than diversifying across a range of private debt strategies, has focused specifically on distressed and special situations because that is where PM Alpha believes the best opportunity currently resides. The target net internal rate of return for the blended strategy is 17.5 percent. It also has a six-year life, thus getting returns back to investors faster than with typical 10-year fund lives.

Being uncomplicated is another feature PM Alpha is emphasising. The online process of investing is designed to be as simple as possible, and much more straightforward than the reams of paperwork still commonly requested of institutional investors. It also offers investors as much ongoing support as possible and claims to be cost effective: fees range from 35 to 55 basis points depending on the size of the ticket (with larger commitments at the lower end of the fee scale).

From his prior experience of channelling retail capital into private markets through complex feeder funds, Douie says he was fed up of “forcing square pegs into round holes”. His new venture is an attempt to make the process easier – both for retail investors and for fund managers keen to lessen their reliance on what may now be a more skittish institutional investor base. It plays to a growing theme.

Write to the author at andy.t@pei.group