💭 Private Equity, Infrastructure, Venture… But for Whom? Lately I’ve been wondering about private markets — infrastructure, private debt, private equity, venture capital. For pension funds and other large institutions, these asset classes are already part of the furniture. They diversify, they can protect against inflation, and in South Africa they’ve often supported developmental outcomes. But for individual investors? Access still appears limited. Ticket sizes are high, structures are complex, and regulation — probably with good reason — errs on the side of protection. For most households the exposure comes indirectly, through their retirement funds or perhaps listed proxies like REITs or Ethos Capital. Elsewhere, experiments are underway: US interval funds, tokenised infrastructure in Europe, Asian feeder funds that cut the entry size down dramatically. Are these genuine breakthroughs in access, or simply new ways of shifting risk? At Futuregrowth Asset Management, we spend a lot of time thinking about the role of capital in building inclusive growth. Which makes me wonder: should we be finding more pathways for South African retail investors into private markets, or does the illiquidity and opacity mean the risks outweigh the benefits? I don’t have a final answer, but it feels like a conversation worth having. #PrivateMarkets #ImpactInvesting #Futuregrowth #SouthAfrica #Infrastructure #PrivateEquity #PrivateDebt #VentureCapital
Ian Norden
1w
Vuyolwethu Nogantshi, fully agree we need to widen the investor base but is the democratisation not needed at the manager level? Giving more managers access to these private credit and infrastructure deals will improve transparency, price discovery and broaden the list of potential secondary buyers, as more managers would have done the initial DD. It should also lower the cost of borrowing for the issuer by increasing competition. This also ensures the manager is assessing risk, managing fees, and creating a diversified offering for their clients - adding value where it matters to the retail client. A professional investor, with an experienced credit team, should always be a better assessor of risk than a part time retail one as this will show over time. Then there is the possibility, in theory if nothing else, that the role of the third party asset managers changes fundamentally if all their clients are suddently given direct access to the same investor universe; and taught how to “fish for themselves”.
https://irei.com/news/franklin-templeton-forms-powerhouse-partnership-with-cip-digitalbridge-and-actis-to-expand-infra-solutions-for-private-wealth-2/ There is enough money in the world to deliver what the world needs. It takes bold action.
Manager Research Analyst at PPS Investments
4wThis concept sounds promising in theory, but we must tread carefully, as it may lead to unintended consequences. I'm a conservative, so my view is that the risks currently outweigh the benefits. Liquidity concerns: Institutions with large balance sheets and high-net-worth individuals are typically well-positioned to assume liquidity risk in the private market space. Expanding access to the broader retail market would require innovative solutions to address these liquidity challenges. Complex structures: Private market deals are often highly complex and lack transparency, making it difficult to fully understand the associated risks. Furthermore, if access is widely expanded, there is a risk that unscrupulous private market participants could repackage poor-quality deals to exploit retail investors. Fees: There is no way around it - fees can be exorbitant, and fee structures are frequently opaque. While I appreciate the arguments for democratizing private markets, significant changes are necessary for true democratization to occur. Private markets are also sensitive to scale; an influx of capital could increase the risk of exposure to low-quality deals.