Liquidity and diversification – or a lack thereof – are often cited as two major obstacles for wealthy individuals hoping to access the private markets. StashAway, a Singaporean digital wealth manager, believes it has found a solution.
The platform last week unveiled StashAway Reserve, a new product offering that will provide accredited investors in Singapore, Malaysia, Thailand, Hong Kong and the United Arab Emirates with access to a curated portfolio of private equity and venture capital funds, according to a statement. These will include vehicles managed by KKR, Carlyle Group and Insight Partners.
Reserve clients will allocate an annual budget of $50,000 or more, which StashAway will pool with capital from other customers and commit across eight to 10 fund opportunities each year, chief executive Michele Ferrario told Private Equity International. Over time, clients will have exposure to a portfolio comprising dozens of funds, diversified by vintage, geography and strategic focus, that is more liquid than one tied up in a limited number of funds of a similar vintage.
“We are trying to make it possible for you to do what the Harvard endowment will do,” Ferrario said.
“They have so much money that they can allocate to as many funds they want, while an individual with a few million dollars in total wealth would want only to invest, let’s say, 10 percent of that into private equity. If you go to a private bank, they’ll have a minimum ticket and you might have to commit half a million all at once, instead of having different vintages.”
StashAway Reserve also offers clients access to early-stage tech start-ups via a partnership with angel investing network XA, Ferrario said. Clients will be able to allocate north of $20,000 each year, which StashAway will invest across 10 to 20 start-ups.
“It’s not simply a question of diversification,” Ferrario noted. “When you think about, for instance, venture capital, it’s actually seen as a hedge to your equity investments. If the venture capital investments do very well, it probably means that some of them are disrupting the large-cap companies that you invest in on the equity side.”
StashAway charges an annual management fee of 1 percent on committed capital on top of whatever fees are set by the fund manager, where relevant. It is working on an internal secondaries capability that will provide additional liquidity for clients where necessary.
Reserve is just one of StashAway’s product offerings. The wealth manager was founded in 2016 with a view to building diversified portfolios for wealthy individuals with no minimum investment size. As of January last year, it oversaw more than $1 billion of assets under management.
Crazily rich Asians
The private wealth channel represents an increasingly significant source of capital for the private markets, as PEI explored in its February deep dive. Perhaps nowhere is this opportunity set more compelling than in Asia-Pacific, which is expected to supplant Europe as the world’s second-largest ultra-high-net-worth individual hub by 2024, according to Knight Frank’s Wealth Report 2020.
The average Asian UHNWI portfolio had a 7 percent allocation to private equity as of 2020, versus 11 percent in North America and 8 percent in Europe. Some 32 percent of bankers and advisers surveyed expected clients in the region to raise their allocation in the near future.
Still, tapping private wealth capital is easier said than done: not only are the liquidity requirements often markedly different from those of institutional investors, but each individual may also have their own unique preferences when it comes to diversification, strategy or investment theme, making it difficult for wealth managers to allocate clients’ capital at scale.
“Scale for us is helped by the fact that we are a digital platform and have access to a very large number of clients,” Ferrario noted. “We don’t work in a classic private bank where we have relationship managers speaking to just 50 clients. That scale helps us to create the minimum mass necessary to actually put together enough money.”