Schroders is aiming to open up private equity to a wider range of investors via a fund on its Gaia platform.
Schroder Gaia II Specialist Private Equity will be available to investors with £50,000 to invest and the option to have a monthly subscription.
It will offer quarterly redemptions. Most private equity funds have a fixed termination date, although will make distributions from fairly early on.
Schroder Adveq, the asset manager’s private equity team, will run the fund, which will focus on small and medium-sized buyouts in Europe and USA under $250m in enterprise value.
An early-bird share class is 1.2% for professional investors. There is no performance fee.
The Sicav part II fund is available to HNW individuals, professional and qualified investors.
Woodford turns investor attention to PE
Willis Owen head of personal investing Adrian Lowcock said private equity has increasingly become an interesting asset class as companies stay private for longer, only floating when valuations are higher.
Lowcock thought Woodford had also raised the profile of the asset class in the UK.
“First it made investors realise that if they want private equity you are better using a suitable vehicle such as investment trusts and a fund manager who has the expertise in that space,” he said.
“Secondly it has also created a focus on the liquidity issue and resulted in fund groups putting their unlisted investments into ITs.”
In September, Merian Chrysalis raised £175m of fresh cash, which will be used in part to purchase unquoted companies currently held in Merian’s open-ended range.
The Investment Trust Private Equity sector discount has narrowed from -26% at the end of December 2018 to -18% at the end of August 2019, according to Association of Investment Companies data.
Investors must think about the risks
Tilney head of multi-asset funds Ben Seager-Scott welcomed Schroders providing more choice for investors, but said it was important to recognise the risks that come with private equity’s potentially high returns.
“If an investor thinks they wouldn’t be comfortable with being ‘trapped’ during a market sell-off, they should certainly think twice before investing in private equity,” Seager-Scott said.
The quarterly redemption cycle “seems pretty sensible” and highlights the asset class is an illiquid part of the market, he added.
“Liquidity is something that all investors should think very carefully about, and is something that has been brought into stark contrast recently.”
