The private markets continue to be a hot area, and investment firms are looking to expand into this channel after seeing others garner significant success.
Traditionally, private equity funds have been difficult to access and have largely been the domain of institutional investors. The funds do not trade on public exchanges or in public markets. But investors’ (and advisors’) interest in the private markets has been piqued after these investments outperformed traditional public funds for the last three years.
In that time, more than 95,000 private companies have seen their annual revenues exceed $100 million while the number of public companies that have seen similar number is only about 10,000.
One new player is the London-based Private Markets Alpha (PM Alpha), which opened its doors earlier this year. The firm offers a digital marketplace for asset and wealth managers that gives them access to the private markets. Last week, it announced the launch of a new platform to make the process more efficient.
In press material, the company said the platform will provide the tools intermediaries require to gain access to the private markets.
“Aside from generally improving access to private markets by addressing all typical barriers to entry for a wealth management firm,” said Tom Douie, founder and CEO of PM Alpha, in a statement, “we are confident our … private markets tool kit delivers the ... benefits of a strong product design and manager selection, leading ... to superior performance outcomes, a structuring benefit, and a cost advantage on the product itself.”
Advisors can use the platform to handle many of their regulatory concerns when it comes to investing in the private markets. The platform will gauge an investor's means and financial sophistication to determine whether they are suited for these markets. It will also allow for disclosure requirements including client suitability checks, product development governance, and know-your-customer requirements.
Over the past few months, the firm has been beta testing the platform with advisors and using that information to make the final decisions on what the platform should include. These sessions also helped shape the investment options available through the portfolio.
“PM Alpha has designed the platform to leverage insight from the wealth management community to better identify what investment needs exist, and through the community feedback better develop most suitable blends of funds for end investors,” the firm said in a statement.
Douie said in a statement that the level of private market experience will not impact a person’s ability to use the platform. It can range from those who are new to the experience to those who just invest from time to time. It can also be an added tool for those who have a well-established presence in the private markets.
One such firm is New York-based J.P. Morgan Asset Management, which already has established a foothold in the private space and is looking to expand it. The firm filed for a new real estate investment trust (REIT) entitled J.P. Morgan Real Estate Income Trust (JPMREIT) designed to invest in private property.
J.P. Morgan is hoping to use this new fund to take its investment strategy in a different direction, according to the firm’s website. The firm itself was unable to comment further because of regulatory restrictions.