Individual investors remain eager for PE exposure

Wealthy individuals and families have increasingly become the go-to sources of capital for private market fund managers.

To expand in private wealth, industry heavyweights and boutique shops have launched vehicles tailored to individual investors while partnering with third-party investing platforms such as Moonfare, iCapital and Opto Investments to make their offerings more accessible to this group.

So, where are individual investors most inclined to put their money in the current private markets?

PitchBook sat down with business development director James Ouderkirk at GLASfunds, which offers investment advisers a platform to access private market funds.

The Cleveland-based company caters to a broad spectrum of clients, including Corient, a $171 billion AUM wealth manager based in Miami, and Pitcairn, a multifamily office in the Philadelphia area managing more than $8.1 billion in assets. GLASfunds targets investment advisers including private banks and family offices.

Ouderkirk shared what private market strategies are drawing attention and addressed possible misconceptions around private corporate loans, at least for individual investors.

This interview has been edited for length and clarity.

PitchBook: Which asset classes do you think are currently attracting the greatest interest from individual investors?

Ouderkirk: If you look at the amount of funds that either we are recommending for advisers or those that are ultimately garnering the most allocation dollars (on GLASfunds’ platform), private equity still is the major asset class. And that would include PE- and VC-focused secondary funds.

More than half of all commitments made by advisers on our platform are to PE and VC strategies. Within those allocations, the split favors PE strategies—buyout, growth equity, co-investment—over venture capital.

This is contrary to what you read in the financial media about the wealth advisory groups going after credit opportunities. Credit is of interest [to investors], but it only represents about a third of global allocations from our adviser firms on our platform.

What strategies have wealth managers and advisers employed to draw high-net-worth individuals to private market opportunities?

The other leg of the stool that we see is the rise in demand for direct allocations. We have larger, more sophisticated advisers … who are increasingly looking to take single deals to their clients and leverage our platform for execution.

That’s something that we’ve seen increasing over the last couple of periods, certainly within the first half of the year. Those would be a direct [investment] into a single company, maybe from a buyout or growth equity manager on a co-investment basis, or something that … these advisers have negotiated through their own personal networks.

Among various private credit strategies, which one is gaining more momentum from individual investors?

We still think that the private credit opportunity broadly is a place that warrants allocations. The trend we see underneath is that the senior secured lending market is very competitive.

So increasingly, when advisers looked at those strategies, they were looking for ways to include structural enhancements including a GP stake, a reduction in the management fee or a reduction in the incentive fee. We have pursued opportunities where investors can receive structural enhancements for otherwise straightforward senior secured credit strategies that focus on financing large sponsor-backed deals.

Other than that, we have made niche [asset-based lending]-focused strategies available on the platform, and we’ve also recommended an infrastructure debt strategy with a comparable risk profile to senior-secured lending.

Spreads for [senior-secured lending] deals have decreased, and covenants have loosened.