Financial advisors: how do you select a private equity platform for high net worth investors?

Private Corner offers easy and varied access to institutional private equity, centred on the client experience, thanks to a fully digitalised and secure approach throughout the investment life cycle.

To find out more about our 100% digital investment platform, contact us:

Contact Private Corner

1. The quality of fund managers

A platform must be supported by a solid ecosystem, including strategic partnerships with leading managers such as Tikehau Capital, Ardian, Partners Group Equity, CVC, and other top institutional funds. These collaborations enable financial advisors to offer their clients access to funds with proven strategies, covering various segments and offering sectoral and geographical diversification.

Reputation and experience

It is crucial to only select management teams that have demonstrated their ability to create long-term value over several vintages, avoiding first vintages. The strategies available on a platform dedicated to private equity in particular and unlisted companies in general must have proven themselves.

The selection criteria are rigorous and based on institutional standards: reputation of managers, track record, expected performance, ESG policy and financial terms.

Find out more about the investment services offered by Private Corner

Exclusivity and screening

Particular care must be taken to ensure that the teams and their strategies selected are genuinely inaccessible to individual investors with a minimum entry ticket of €5 or €10 million. To implement an effective selection process, it is necessary to:

• Implement continuous monitoring of the market and of the management teams during the fundraising process.

• Identify the most relevant investment opportunities.

• Carry out in-depth due diligence and rigorous benchmarking.

The objective of a platform is to build a comprehensive and diversified open architecture offering for investments in unlisted assets covering:

-Private Equity: growth capital, buyout capital, co-investment, secondary.

• Private debt: with a focus on the Capital Solutions strategy

• Infrastructure: including brownfield and greenfield assets.

With a well-constructed open architecture offering, financial advisors and their clients have access to a range of 5 to 7 funds (feeder and fund of funds) exposed to the best institutional funds, while benefiting from excellent operational and financial monitoring.

Access to institutional quality funds

The advantage of going through a private equity platform is also that it will only select funds with high barriers to entry for its partners, i.e. normally accessible from 5 to 10 million euros. By aggregating the subscriptions of all private investors and thus becoming the single point of entry, the platform will act as a bridge between these managers and private investors through their advisors.

2. Fund-related fees

Fees are one of the key factors when selecting a private equity platform. These fees can vary considerably from one platform to another, and it is essential to understand their structure to avoid surprises. The fees associated with a fund available on a platform include the fees of the master fund and the fees of the feeder fund. The main categories (not exhaustive) are as follows:

• Management fees for the master fund or underlying funds: these fees are collected by the GPs

• Carried interest: these fees are levied when the fund makes gains. They often represent 20% of profits above a predefined return threshold, called the hurdle rate. They allow for an alignment of interests between the management teams and the investors. These fees are generally charged by the management teams of the master fund, however we draw attention to the fact that some platforms also apply them, thus doubling the carried interest. Private Corner is remunerated only by management fees.

• Feeder management fee (the platform): these annual fees are charged by the management company/digital platform for the management of the funds of funds or feeders that it has structured.

• Investment services commission: these commissions remunerate the advice of distributors who do not work with fees.

• Subscription commission: these fees are generally at the discretion of the distributor and are set at the time of subscription in order to remunerate their advice.

It is important to compare the total costs that will have to be borne and to assess their impact on performance before recommending a fund. These costs are detailed in the Key Information Document (KID) of each investment fund.

3. Access to information and transparency

A private equity platform essentially makes digitalisation the core of its model. An intuitive digital platform allows for:

• Smooth management of subscriptions and successive capital calls.

• Transparent monitoring of investments thanks to dynamic dashboards and detailed reports (capital account statements, projected cash flows).

• Documentation accessible online (subscription forms, reports, call/distribution notices).

In addition to these features, it is worth analysing the reporting tools available to advisors and their clients. These tools should enable in-depth analysis of portfolios: sectoral, geographical and strategic exposure, thus enabling advisors to better understand and optimise their clients' allocations.

This approach allows financial advisors to focus on their main mission, namely to support their clients in building a diversified and efficient allocation in unlisted assets, while relying on reliable and user-friendly tools.

To go further, detailed financial reports by fund, analysing commitments, calls and distributions as well as all the components of the embedded performance of investments (TRI, DPI, RVPI, TVPI) provide valuable insights into investments.

At Private Corner, we offer a consolidated view of investments. This provides a comprehensive understanding for both Financial Advisors and their clients.

This analysis provides a view by vintage year, strategy, currency, geographical area and sector of activity for the entire portfolio made up of all the funds in which the individual has invested. We also offer to go into more detail in the analysis by breaking it down line by line according to the amounts called up.

4. Robust performance across vintages

As unlisted funds operate on a vintage basis, knowledge of the performance history of private equity funds available on a platform is a good, but not exhaustive, indicator of the quality of the opportunities on offer. An investor with assets to invest must analyse in depth the past returns of the funds to understand whether they are in line with their return objectives. It is preferable to invest in strategies that have demonstrated their robustness over several vintages. This is why it is useful to examine the behaviour of the funds through different economic cycles to analyse their behaviour in periods of crisis, enabling an understanding of their long-term resilience and the quality of the management teams.

However, it is important to note that past performance is no guarantee of future results.

5. The platform user experience and customer service

For financial advisors and their wealth management clients, a smooth user experience and quality customer service are essential.

Here are a few aspects to consider:

• User interface: the platform must offer intuitive navigation, with clear and easily accessible tools. Investors must be able to consult investment opportunities, subscribe to funds and monitor their performance in a simple and efficient manner.

• Dedicated support and education: wealth or asset management advisors expect responsive and personalised customer service.

It is advisable to pay particular attention to the personalised support offered to partners to help them manage unlisted assets and respond effectively to the needs of their clients. Make sure that the platform offers access to a team that can respond quickly to questions and provide advice tailored to the specific needs of advisors.

The platforms must be able to provide continuous training in various formats, including interactive webinars, practical guides and face-to-face events. These initiatives aim to strengthen the knowledge of Financial Advisors on the specificities of investments in unlisted assets in order to acquire solid expertise in this field. Proximity is key!

A dedicated team of experts must be available to partners to answer their specific questions. Whether for strategic advice, technical assistance or help with portfolio structuring, for reliable and responsive support.

In addition, accessible and detailed documentation must be available through the Private Equity platforms, including educational guides, in-depth analyses and concrete examples. These tools are designed to support the work of financial advisors and enable them to effectively explain the opportunities and risks of unlisted assets to their clients.

In conclusion

Getting started in the unlisted market requires selecting a private equity platform that will position itself as a true long-term partner. As a financial advisor, this partnership will provide access to and offer a unique and diversified open architecture (private equity, private debt and infrastructure). Several key criteria should be evaluated, including fees, the quality of the strategies selected by the platforms, access to information, the track record of the management teams, and the fluidity of the selected platform.

The primary objective of a private equity platform is to support wealth or asset management specialists who wish to offer their clients investments in unlisted assets. Under no circumstances should the platform act as a substitute for them in relation to their clients. It provides them with the best tool to enable their clients to access a balanced and differentiated range of unlisted assets.

The success of financial advisors must be a central concern for a platform. Innovation and collaboration must be at the heart of the approach of private equity platforms. In a process of continuous improvement, a constant dialogue is maintained with distribution partners to offer the best investment proposition as well as a fluid and secure tool.

The platform will have to continue to invest in its technology to enable an optimal experience for distribution partners. The power of the technology must facilitate the work of financial advisors and strengthen their value proposition.

Trust is essential in this sector of activity. This is why a clear distribution agreement is established, defining the framework for collaboration with partners. This agreement aims to protect clients, whose distributors are the only points of contact. Finally, the platform reaffirms its commitment by reserving exclusive access to its funds for its distribution partners. Together, they are building the future of private equity investment.

Warning

Private Corner was approved as a portfolio management company on 05/11/2020 by the Financial Markets Authority under number GP-20000038.

• Investing in alternative investment funds (AIFs) involves risks, particularly of capital loss and liquidity risk. The funds invested are locked in for a minimum of 10 years.

• Investment in the funds is reserved for professional or experienced investors.

• Past performance is not a guide to future performance and no guarantee is given that objectives will be met.

All information presented is the opinion and interpretation of Private Corner.