A growing number of private equity firms, which have typically only accepted cheques from large institutions, are choosing to tap the private investor market to help them raise money.
Fintech firm Coinvestor, which helps investors pool their cash to commit to funds which usually only accept hefty sums, was signed by south of England-focused Altitude Partners Thursday to help the firm raise from high-net-worth retail investors.
Meanwhile Connection Capital, which helps investors combine their money to commit directly to private equity deals and funds, has seen an uptick in appetite from both individual investors and fund managers.
Claire Madden, managing partner at Connection, said first-time funds were particularly interested in grabbing cash from individual investors.
“For a lot of institutional investors, the past track record of a first-time fund manager matters diddley squat,” she said. “They automatically say it’s a first time fund and it’s too risky.”
However niche firms like Connection Capital and the advisers which use Coinvestor's platform, representing private individuals, are able to do due diligence on each new manager and assess the risks which the fund poses.
Madden also said the diversity of investor may benefit the fund manager. Private equity firm Lyceum was forced to cancel its recent fundraise after a number of its institutional investors pulled out, citing concerns "unrelated to Lyceum".
Individual investors, Madden suggested, might be prepared to keep investing when institutions are not.
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