Allfunds joins the race to match private wealth with private capital

March 31 (Preqin News) – Private wealth management platform Allfunds has launched a new division aimed at providing better client access to alternative assets and private markets. The Madrid-based firm, which has more than €1.3tn assets under administration, said that creating Allfunds Alternative Solutions was the only way it could meet growing demand from clients.

Why it matters: Allfunds is the latest player in the space attempting to link private capital with wealthy investors. 

• According to the recent Preqin report, Fundraising from Private Wealth: A Guide to raising capital, private capital fund managers have enjoyed a decades-long fundraising boom, but now raising capital from institutional investors is becoming more challenging. Preqin forecasts that global private capital fundraising will grow to $1.58tn by 2027 from $1.16tn in 2022 at a compound annual growth rate (CAGR) of 3.57% over the period, materially down from the 11.70% CAGR seen between 2015 and 2021.
• Cameron Joyce, Deputy Head of Research Insights at Preqin and lead analyst on the report, said: “We expect private capital fundraising to become increasingly focused on the non-institutional space, and especially on private wealth. Much of the activity has been focused on the US, but we expect more capital fundraising from private wealth across most global markets.”
• Preqin estimates that the global private wealth industry could already be as big as $130tn, including the mass affluent (individuals with up to $1mn of investable assets), as well as HNWIs, UHNWIs, and family offices. Private wealth allocations to alternatives currently account for less than 5% of that.

Who’s leading the race: Some of the largest alternative assets fund managers have already made significant inroads into the private wealth space. 

• KKR has raised $66bn from private wealth to date (15% of total capital raised) and expects between 30% and 50% of its fundraising to come from the market over the coming years. Apollo Global Management aims to raise $50bn of retail capital between 2022 and 2026.
• Regulators have been making moves to open alternatives up to a wider audience. The Securities and Exchange Commission (SEC) broadened the definition of accredited investors in 2020, making it easier for individuals to qualify. Similarly, the EU introduced the European Long-Term Investment Funds (ELTIF) Regulation 2.0, while the UK now has the Long-Term Asset Fund (LTAF).
• Singapore, which has benefited from an exodus of private wealth from China and saw the number of single-family offices double to 700 last year, is positioning itself as a hub. Technology platform ADDX, which has been licensed by the Monetary Authority of Singapore, has raised more than $500mn with ticket sizes as low as SGD 5,000 ($3,762). Partners Group became the first major private equity GP to tokenize a fund with ADDX in September 2021, while ADDX is also working with Hamilton Lane.

What happens next: While alternative assets are attractive to wealthy investors, there are significant challenges for both investors and managers, including accessibility, onerous operational burden, due diligence, secondary liquidity, lack of knowledge, and illiquidity.

Several types of intermediaries are trying to bridge the gap, including B2B intermediaries (such as iCapital and CAIS), B2C platforms (Moonfare and Titanbay), direct-to-private platforms (Forge Global), data solutions platforms (including Juniper Square, Addepar, and Palico), and technology companies (ADDX and RealBlocks).

“Financial advisors are increasingly seeking uncorrelated sources of return to mitigate risk in their clients’ traditional stock/bond portfolios. Technology-enabled platforms have made it possible to aggregate individual investor commitments into feeder funds at lower minimums", says Lawrence Calcano, Chairman and CEO of iCapital.