Leading digital private markets platform Moonfare found in a recent survey of individual investors that roughly 83% intend to increase their investment in private equity over the next 12 months.
The findings are from a survey conducted in September of 244 Moonfare investors. Private equity comes into focus as 77% of investors said they predict their investments will meet expectations and 8% expect their investments to exceed their expectations. These figures are despite the fact that 67% said they were preparing for a recession.
In an exclusive Alternatives Watch interview on the sidelines of North American Super Return Conference in New York this fall, Moonfare Founder and CEO Steffen Pauls said that the largest players in the private equity space were preparing for a huge shift toward serving individual accredited investors on digital platforms and to even transact via blockchain.
Before Pauls launched the Moonfare platform in 2018, he was looking to solve his own problem as an investor. When he left his role as Managing Director and Head of Germany at KKR, he no longer had direct access to invest more capital in KKR’s funds. And in solving for his own personal need, he has since provided access to brand name private equity funds including those offered by Khosla, Carlyle, Tiger Global, Insight Partners and KKR.
Today, the Moonfare platform is global and has roughly $2.3 billion in AUM.
According to Moonfare’s investor survey, the minimum investment requirement is an important consideration. Although the minimum threshold in private equity is still higher than that of public markets, minimums have dropped in recent years thanks to tech-enabled solutions. The Moonfare platform’s minimums are as low as €50,000 in some instances.
The Moonfare platform itself saw AUM growth of almost 90% in 2022 as the number of investors on the platform grew to 3,272 and community of registered users more than doubled to over 46,000. The firm said it has grown the number of funds on the platform from 40 to 69 over the last year.
Accredited investors have already come a long way, according to Moonfare’s findings. Roughly 37% said that one-fifth of their portfolio or more is currently invested in private assets. These figures suggest many are already in the allocation ranges percentage wise of their larger, more established institutional investor counterparts.
Looking at private assets overall, 56% are expecting buyout funds to outperform other private market strategies, while 40% of investors expect infrastructure funds to generate the best returns in the short term. Only 15% indicated they were currently invested in infrastructure as Moonfare pointed out that the secondaries space has seen increased interest as well.
Buyout funds remain popular among Moonfare investors interested in getting exposure in disruptive business trends such as technology with more than 77% of investors citing technology as one of the most promising investment sectors in private equity.
“Digital transformation is particularly imperative in today’s economy – as capital costs rise, companies have to invest more into productivity gains to remain competitive,” wrote Pauls in his survey commentary. “All this translates into enormous investment opportunities in an industry characterized by high margins and quickly scalable products and services.”
In turn Moonfare, has raised capital from private equity firms interested in technology, with a $125 million Series C that was led by Insight Partners in 2021.
Historically, buyout strategies, growth equity and tech strategies have dominated the platform.
In selecting funds, investors told Moonfare that most compelling information determining investment are track record and the leadership team’s background as brand name is less of a consideration when investing.
The insights will likely help Moonfare to further grow its platform. Pauls has traditionally screened 400 funds annually with up to 20 funds joining the platform annually which have gone on to find investors across 30 countries.
Going forward, Pauls sees more activity to be driven by blockchain as tokenized and niche strategies come on board including allocations to co-investment funds, other alternative strategies such as hedge funds and music rights, lending to artists and sports figures.
And thanks to the digital-driven democratization of private markets, the bandwidth to add such strategies remains plentiful in Moonfare’s estimation as the interest in new alpha sources on the part of banks, RIAs, wealth managers and accredited investors broadly continues to grow.
With offices in Germany, Singapore, London, New York and Switzerland, Moonfare’s global reach continues to grow as well. Over the summer, Moonfare expanded in the United Arab Emirates to offer that regions first-ever digital investment platform.
Pauls’ enthusiasm for private markets seems poised to grow along with the platform’s expansion. He views the space as being well placed to capitalize on some of the greatest economic themes for the next decade. This includes technological transformation, supply chains and the energy transition/ESG.
“For me, the attractiveness of the asset class is clear: private equity not only offers the potential of outsized risk-adjusted returns but also provides investors with one of the best ways to contribute to a meaningful change in the world,” Pauls said in a statement.
