The small investor, what should I think about?
"Companies that are growing need more liquidity, or money to make investments. This applies not only to the big publicly traded companies, but especially to startups, scale-ups and to many SMEs that you won't find on the stock exchange. Think not only of local stores, but also of new innovative companies with scale potential. These want to grow and need capital to do so. Normally, institutional investors offered that capital and, against this, high net worth individuals can also participate."
How accessible is that market?
"Until recently, investing in private markets was mainly something for institutional investors. Many private structures were closed-end funds: they had long maturities (usually 10-15 years), high minimum deposits, you had to pay in extra money, the so-called capital calls, your money was tied up. That made access for individuals practically impossible. However, the market is changing."
What has changed?
"New structures and regulations make private markets more accessible: for example, evergreen or open-end funds typically offer flexible entry and exit points, for example monthly entry and quarterly redemptions for a portion of capital. Minimum deposit amounts have become much lower, think thousands of euros rather than millions, and ELTIF 2.0 regulations have improved retail access and transparency."
Still: "liquidity has increased, but never completely equal to exchange investments. You have to take into account less frequent valuation, possible restrictions on redemptions and thus have a longer investment horizon."
That sounds like everyone can participate.
"Under the introduction of the Eltif 2.0 regulations, Evergreen funds offer more opportunities for private participation. Of course, these conditions still don't make it suitable for everyone. You have to have the right knowledge and know how the product works. You need to be aware of the benefits as well as the risks. Here, knowledge and careful selection of funds remain crucial." It is other type of asset class that can provide diversification in the investment portfolio. To spread that knowledge, I became active in Dufas' new working group. Our main goal: education."
What's going on right now?
"Companies are finding private investment an effective way to raise money to grow. However, it is important to find good quality companies to invest in. The private market is on the rise, so funds need to select good companies that new investors can get into. You don't want the risks to be too high and investors to suddenly lose their money. That's why it makes sense to maintain a diverse portfolio. So the rest could be helped with money from private investors. That's a huge market, isn't it! There is significant potential in this market!"
