To mark PEI’s 21st anniversary, our editors past and present recalled their most memorable headlines.

The democratisation of PE has been a hot topic for some time. Regular conference attendees can attest to the fact that, more often than not, a panel on the subject will be found on the agenda.

In October last year, Stephanie Drescher, chief client and product development officer at Apollo, said the firm was “turbocharging its commitment to the global wealth channel”. Less than 12 months later, Verdun Perry, senior managing director and global head of Blackstone Strategic Partners, said at IPEM 2022 in Cannes – where the panel on retail investing was so popular that there weren’t enough seats available for all attendees – that democratisation was not a matter of if, but when.

With all this in mind, the Private Equity International team delved into its first ever long-form exploration of the private wealth opportunity in February 2022. We quickly realised that the project was a far bigger undertaking than we had anticipated. The areas we covered ranged from how technology platforms are being used to bridge the divide between sponsors and wealthy individuals, to how fees and returns can be major hurdles for retail investors looking to tap PE for the first time. We were forced to be selective, but as the subject gains more interest and grows in complexity, there will certainly be much more to say on it.

Inherent obstacles

Until as recently as a few years ago, private equity managers largely ignored retail investors. The commitments they are able to offer are relatively small – starting from around $50,000, compared with the millions commonly contributed by institutional players – while the additional admin required to chase capital from multiple investors of this size was considered more trouble than it was worth. What changed?

First, a small cadre of tech-enabled fundraising platforms began to pop up. “When you are having a high volume of low-ticket investors, it’s almost like the micropayments of the private markets,” Henry Reynolds, chief operating officer at Bite Investments, told PEI as part of our deep dive. “When you’re going through that, you do need the technology to drive the efficiencies.”

Second, major players found a way to contend with one of retail investors’ biggest concerns: a lack of liquidity. “We listened to the market… Illiquidity was one of the main concerns left standing between individual investors and allocations to private equity,” said founder and chief executive of Moonfare, Steffen Pauls, in 2021 when the firm signed an agreement with Lexington Partners that would make the secondaries buyer its chosen liquidity provider. It’s a sort of reverse catch-22: when the industry makes more effort to appeal to individuals, individuals become more appealing to the industry.

Educating the masses

Yet there are a number of barriers still standing in individuals’ way. Education, for one, remains a concern for a lot of market participants. As Sofie Kulp-Tåg, senior investment manager at Skandia Mutual Life Insurance Company, told PEI in March: “It’s a big risk… You really need to make sure that investors understand the asset class and how long you have to stay in the game.”

The transition isn’t complete, then, but it’s undoubtedly underway. Blackstone, for example, doubled the number of staff in its European private wealth unit in the six months to March. Individuals are no longer the unattractive counterparty they once were, and with a growing number of LPs struggling with the denominator effect and overallocation to the asset class, this can only be a good thing. In the months and years to come, readers can certainly expect more reporting on the topic in the pages of PEI.

Helen de Beer is editor of Private Equity International at PEI Group.