A private equity investment platform is a digital interface that allows private investors to access investment opportunities in unlisted companies. These platforms facilitate subscription to private equity funds or specific projects, offering more accessible investment amounts than traditional channels. They also offer tools for selecting investments according to defined criteria (sector, geography, strategy) and provide digitalised portfolio monitoring. In this way, they help democratise access to private equity, which was previously reserved for institutional investors. This article reviews the impacts of these digital platforms on the unlisted sector.
Private Corner provides private wealth management professionals with a digital platform giving access to a full range of investment solutions in unlisted assets (private equity, private debt and infrastructure). To find out more, contact us:
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The evolution of technologies
FinTech has radically transformed the world of investment over the past decade, introducing new models for accessing markets and simplifying investment processes. The private equity sector, although more complex than listed markets, has not escaped this wave of digital transformation.
Private equity platforms, using these technological advances, have impacted the sector to varying degrees:
Reducing barriers to entry related to minimum investment
In the past, an investor had to have 5 to 10 million euros to invest in private equity or unlisted funds more generally, limiting their access to institutional investors or very large UHNWI families. Today, thanks to digital platforms, high-net-worth investors, accompanied by their financial advisors, can access funds with more accessible entry amounts, often starting at €100,000.
Simplifying investment processes
These online platforms dedicated to unlisted assets have automated and digitised historically complex and lengthy processes, making investment in unlisted companies more secure, fluid and accessible. Wealth Management Advisors, Family Offices or private banks can now examine solutions in line with the specific needs of their wealthy clients and support them throughout the subscription process, as well as monitor their clients' capital calls directly via online interfaces, which improves efficiency and reduces the time spent on administrative procedures.
Increase transparency and information
Management companies backed by a digital platform have the advantage of controlling the entire information chain and being able to provide financial advisers and their clients with a clear and regularly updated body of information on the funds managed internally and exposing them to the big names in unlisted companies. This increased transparency helps financial advisors and their private clients make more informed decisions.
Catalysts for accessibility
Management companies that have received AIFM [AMF] approval (https://www.amf-france.org/fr) and choose to rely on a proprietary private equity platform play an essential facilitating role. Here's how they help make access to private equity easier:
Reduction of minimum investment amounts
Historically, only large institutional investors or ultra high-net-worth individuals (UHNWIs) could invest in private equity funds, due to very high minimum investment amounts. Digital platforms have changed this by allowing investment in funds with more affordable entry tickets, €100,000.
As a reminder, private equity platforms such as Private Corner analyse the funds being raised. Once these funds have been identified and due diligence has been carried out, the management company/platform will structure a feeder or a fund of funds to invest in the selected strategy. With this approach, Private Corner, which becomes the sole point of contact for the selected GPs (General Partners), aggregates all subscriptions from individual investors within its feeder, which itself invests in the master fund. This makes it possible to lower the minimum investment from €5 million to €100,000.
Increased diversification
For a long time, access to private equity for private investors was limited to tax-efficient funds such as FCPIs (mutual funds for innovation) and FIPs (local investment funds). These funds have recently been heavily criticised in an AMF report
Access to private equity through traditional channels was often limited to a few specialised funds or to privileged partnerships with specific management companies. Access to institutional-quality funds was completely closed. Private equity platforms give financial advisors and their investors access to a diverse range of funds covering various strategies (buyout, venture capital, growth capital) and sectors (technology, healthcare, energy, etc.), as well as themes such as decarbonisation and various geographical areas. This ability to build a real allocation in unlisted assets like a portfolio in listed assets provides a formidable diversification tool by accessing global management teams. This was once impossible for a private investor without a financial portfolio worth several million.
Democratisation of distribution and institutionalisation of access
One of the main obstacles to private equity investment was also the complexity and lack of expertise needed to select the right funds. This is because, as these markets are by definition private, the information is not publicly available. Management companies backed by an online platform mitigate this difficulty. They have teams of managers and product specialists whose job is to constantly analyse the funds being raised. They select between five and seven strategies following in-depth due diligence and regular meetings with specialists from the unlisted world. Their job is also to make the management strategies deployed by these unlisted experts understandable by providing explanatory documentation on each investment opportunity. This allows Financial Advisors and their less experienced investors to access quality opportunities without the need for the advanced technical knowledge of private equity that an institutional investor may have.
Ease of access and dematerialisation
The traditional private equity investment process often involved cumbersome procedures, with paper documents, manual checks and long processing times. Private equity platforms have introduced a complete dematerialisation of transactions, making access faster and more convenient. An investor can now explore funds, complete their subscription file, monitor the performance of their investments and access detailed reports via an online platform, 24/7.
Opportunities for private investors
Private equity platforms open up a new range of opportunities for financial advisors to offer their private clients, particularly those seeking diversification and returns that are uncorrelated with listed markets. These include:
Portfolio diversification
Investing in private equity provides access to an asset class that is not correlated to the stock markets, which is an effective means of portfolio diversification. Private investors can thus include unlisted companies in their portfolio, whose potential return expectations are attractive and not very sensitive to fluctuations in public markets. In the USA, private investors allocate up to 20% of their portfolio to unlisted assets, compared to less than 0.1% in France!
Access to companies with high growth potential
Private equity allows investment in companies that have not yet exploited their full development potential or in fast-growing sectors such as technology, healthcare and renewable energy. These investments can yield higher returns than listed shares in the long term, although the associated risks are higher.
Thus, according to the latest France Invest study (at the end of June 2024), although listed markets had an exceptional year in 2023, private equity continues to outperform other asset classes in the long term. Over a 10-year period, the net IRR of French private equity reaches 13.3% per year, compared with 10.5% for the CAC 40 and 10.1% for the CAC All-Tradable.
📈 Change in net IRR over 10 years (2014–2023)
Reference year: 10-year net IRR
End of 2019 : 11.3%
End of 2020 : 11.1%
End of 2021 : 14.5%
End of 2022: 14.1%
End of 2023: 13.3%
This dynamic is partly explained by the resilience of the supported companies, which are able to weather economic cycles thanks to medium- and long-term value creation strategies. In addition to a support role, private equity funds often have a direct influence on these strategies, or even operational involvement. Although the performance gap with the CAC 40 narrowed in 2023, due to a particularly favourable period for this index, the superiority of private equity remains evident over time.
Once the funds were fully liquidated, investors recovered on average almost double their initial investment.
Access to sophisticated investment strategies
Private equity platforms give private investors access to strategies covering the entire maturity spectrum of companies:
We also find almost similar granularities with other private assets such as private debt with funds specialising in direct lending, mezzanine debt or capital solutions, for example, or in infrastructure.
Over the years, the unlisted universe has become as finely granular as can be seen in listed investments, becoming portfolio construction tools in their own right.
Risks to consider
Despite these advantages, it is important to emphasise that investing in a private equity fund or any other fund dedicated to private assets presents significant risks. Investors must be aware of these risks before committing to these platforms.
1. Illiquidity
Unlisted companies are a relatively illiquid asset class. Investors must be prepared to tie up their capital for several years, often 10 years, before they can release their investment. However, before maturity, they benefit from distributions as the fund sells the holdings in the portfolio.
2. Complexity of investments
Although management companies backed by a digital platform provide detailed information, investing in unlisted companies remains complex and always requires the support of a financial advisor who has a global vision of the investor's assets and projects.
3. Risk of capital loss
Investing in unlisted companies through an investment fund carries a risk of partial or total capital loss. Investors, guided by their financial advisor, must therefore allocate their assets judiciously and not expose a disproportionate share of their portfolio to this type of asset.
In conclusion
Private equity platforms play a crucial role in opening up unlisted investment to a broader investor base, democratising the distribution method of this asset class and providing access to opportunities that were previously reserved for institutions. Thanks to new technologies, they enable wealth and asset management advisors and their clients to diversify their portfolios, participate in companies with development potential and benefit from attractive returns. However, these advantages come with risks inherent to the illiquid and complex nature of private equity, requiring special attention and prudent management.
The rise of private equity platforms is a sign that the market is adapting to the needs of private investors seeking to diversify their assets while having simplified and transparent access to sophisticated investments.
Disclaimer
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, including the risk 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.
Finally, all the information presented is the opinion and interpretation of Private Corner.
