Fundraising platform Moonfare is developing several private markets products designed for individual investors lower down the food chain, affiliate title Private Equity International has learned.
The Berlin-headquartered outfit plans to launch a European Long-Term Investment Fund (ELTIF) alongside an as-yet-undetermined partner as early as Q4 2022, founder Steffen Pauls said. The new offering will have a €10,000 minimum buy-in, versus around €50,000 for Moonfare’s existing products, which include buyout and growth equity fund of funds portfolios.
It also plans to launch a securitised note product, Pauls said.
“This democratisation theme currently ends… at the accredited investor, professional investor or qualified purchaser [level] in the US,” he added.
“We are working not only on building out our institution – we are also very active in terms of developing new… retail products for private markets [and] private equity that are eligible even to lower minimums and the different class of investors. Our mission doesn’t end at accredited investors.”
Introduced in 2015, ELTIFs enable private equity managers to access a broader range of investors, including both professional and retail. Eligible investments include debt and equity instruments in all unlisted companies, as well as real assets such as infrastructure, per Invest Europe. Private Debt Investor examined the landscape of private retail investing in a recent cover story.
BlackRock is among those to have taken the plunge, holding a final close on its debut private equity ELTIF in April last year, PEI reported at the time. BlackRock Private Equity Opportunities is a €509 million vehicle providing exposure to the firm’s direct investments with a minimum ticket size of €125,000. Ten European wealth managers committed to the fund, including BNP Paribas Private Banking and Wealth Management, as well as 25 institutions.
It is unclear how the Moonfare securitisation product will work, and a spokesperson for the platform declined to provide additional details. One possibility is that it will resemble Temasek’s Astrea series of collateralised fund obligations, in which asset owners securitise a fund portfolio to generate liquidity without having to sell their interests. The resulting bonds are backed by cashflows generated by the underlying funds. The latest of these, Astrea VII, launched earlier this month and offered retail investors access to a higher returning class of bonds than its predecessors.
Upon its founding in 2016, the majority of Moonfare’s AUM stemmed from high-net-worth individuals familiar with the asset class, such as bankers, lawyers, private equity managers, hedge fund managers and consultants, rather than wealth managers or private banks. The latter channel now accounts for roughly 25 percent of its business and is expected to reach parity with the direct-to-consumer channel within two years, Pauls said.
The platform has around €1.6 billion of assets under management globally.
“GPs are… very open and understand the strategic importance of this channel – it’s the fastest growing channel they have,” he added. “The largest untapped pool of capital is with private individuals… in Europe alone, it’s a similar size to the entire institutional market.”
Moonfare has expanded its focus beyond Europe in recent years. The platform opened offices in New York and Singapore in January and April, respectively, having previously entered Hong Kong in 2020. The Singapore office is led by Kit Toh, a former client adviser at JPMorgan and managing director at asset manager Capital Group, who joined as head of partnerships for Asia-Pacific in January.
In May, Moonfare expanded its partnership with investment manager Fidelity beyond Europe and into Asia, according to a statement. The relationship, which started in April 2021 in Germany, Switzerland, Italy, France and the UK, will enable Fidelity’s institutional and eligible clients in Asia, such as banks and family offices, to access Moonfare’s private equity, private debt, infrastructure and real estate offerings.
“[At the] end of 2020, we had €10 million in [Asian] assets under management, and in 2021, we were able to grow our business by 6x to €60 million,” Pauls said.
“And then we are expecting now the combination of Hong Kong and Singapore to grow the business another 3x year-over-year to around about €200 million AUM. Our European team is working on what can we do for Asia to bring down minimums and reach a broader part of the population.”
It comes as private markets participants flock to Asia in the hopes of accessing its rapidly expanding pool of wealthy individual investors. The region is expected to supplant Europe as the world’s second-largest ultra-high-net-worth individual hub by 2024, with high growth expected in India, China and Indonesia, according to Knight Frank’s 2020 Wealth Report. The average Asian UHNWI portfolio had a 7 percent allocation to private equity that year, versus 11 percent in North America and 8 percent in Europe.
“Even in markets like Singapore and Hong Kong, there’s such a disparity in terms of level of knowledge, and even within the [accredited investor] space,” Toh told PEI.
“You have clients who are very well versed with private equity and can almost be self-directed, and then there are clients who… qualify as [accredited] or [professional] in Hong Kong but have very little knowledge of private equity. There’s almost this fear of going into or venturing into the unknown, and that’s why education is such a big part of it.”