iCapital head of international Marco Bizzozero and PM Alpha chief executive Tom Douie make the case for wealth managers to invest in private equity.
Private equity as an asset class has been attracting interest from investment firms, as they hunt for alternative sources of returns amid market volatility.
A number of platforms founded in recent years are attempting to capitalise on this trend, in many cases led by financial services veterans with decades of experience. And they have identified private client wealth managers as a key market.
Marco Bizzozero worked in both private equity and wealth management for over 25 years, including LGT Partners and Deutsche Bank, before taking charge of the international team at iCapital.
The platform, founded in 2013, manages more than $136bn (£116bn) in global client assets, of which more than $32bn (£27bn) are from non-US, international investors.
‘We see the opportunity for wealth managers to increase private market allocation for their clients, which is currently very low,’ said Bizzozero (pictured below).
Traditional barriers to investing in private equity include finding the right managers, manual client servicing and reporting and a general lack of transparency and education in the asset class. But these can be overcome with digital technology.
‘We create feeder funds, which aggregate these private investors investing at lower minimums, streamlining and automating the process for the asset managers,’ Bizzozero said.
The company recently partnered with AXA Investment Manager’s alternatives arm to create the AXA IM Alts’ £422.8m Global Health Private Equity strategy. The fund focuses on medical devices, biopharmaceuticals, vaccines, and diagnostics.
One platform to launch more recently – this month – is Private Markets Alpha, set up by three former Citi Private Bank executives and an ex-Neuberger Berman director.
The firm’s chief executive Tom Douie was previously global head of distribution for credit boutique Muzinich and Co, having spent his career in asset management business development serving the wealth management sector.
During this time, Douie built a relationship with the team at Citi whilst conducting his last and biggest private market deal.
‘We collectively made the observation that private markets external fund offerings were profitable for the few banks that could offer them,’ said Douie.
‘But they were only available to clients of those firms.’
‘We thought, wouldn’t it be great if we could take our combined expertise to represent much more than a single house of products? That is what led us to set up the business.’
Douie (pictured below) argues PM Alpha is set apart from other platforms by its sole focus on the wealth management sphere.
‘We’re really focused on the intermediary that talks to clients who don’t really have the time or the knowledge base to make value assessments,’ he said.
‘We want to provide that toolkit to their wealth manager because they have the context of their client’s full financial needs.’
On the 20th September, the team launched a full beta version of the platform at the IPEM industry conference in Cannes, which contained PM Alpha’s first two implemented strategies, which will later become funds. The full version of the platform will be available by Q1 2023, following feedback from users.
It aims to deliver funds at a cost range of 25 to 55 bps, in line with its aim to make private markets more accessible.
The first strategy’s theme will be fintech, with a European bias. Douie believes it is a protected area to invest for growth, despite being late cycle.
The second theme will be on the income gap, which will offer shorter-life, private market, income generating products that are inflation-protected.
‘We will implement this into our strategy by choosing specific thematics, in our case, corporate direct lending and structured credit in the US and European markets,’ Douie said.
‘These are late-stage vehicles that are well advanced in their deployment, so they will come with a healthy current yield and a shorter life than most investors would expect for private markets.’