Updated 24/11/2022

The challenge of democratizing private equity

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Image - tribune on democratizing private equity by Virginie Morgon

While the private equity industry has already proven its ability to fuel transformative growth for companies, it needs to work on giving small savers access to its high-performing assets and the opportunity to contribute to the real economy. Eurazeo was among the first private equity firms to demonstrate its thorough understanding of this issue when it began working with private clients two decades ago. In more recent times, it has extended growth, buyout and private debt opportunities to individuals.

 

The opening of private equity to individual investors 

People often have to choose between risky investments (extremely volatile stocks) and more stable but lower-yield vehicles (such as life insurance, the most popular choice in France). Another option does exist but is not very common, as many savers are not familiar with it and some are happy to stick to what they know. Traditionally the preserve of institutional investors, private equity is now open to individual investors, giving savers access to a high-performing asset class and encouraging them to move from low-yield investments to real-economy investments.

The movement to democratize private equity was spurred by the French law on growth, activity and equal economic opportunities in 2015, then gained momentum following the introduction of the 2019 “PACTE” law, which made it easier for individuals to access private equity funds, whether directly or indirectly (through life insurance policies, SME-oriented personal equity plans, employee savings schemes and pension plans). Despite these initiatives and the clear efforts made in recent years to educate a wider range of savers about private equity, this asset class is still associated with elitism and viewed as the preserve of investors with significant capital to invest.

In France, almost 30% of households’ wealth is invested in life insurance funds (worth €1,684 billion in the third quarter of 2021) according to the Banque de France, whereas only a tiny percentage (estimated at less than 0.1%) is invested in private equity funds according to France Invest. The reason for this being that private equity was once limited to very wealthy individuals, who were able to invest several hundred thousand euros in 10-year closed funds without being discouraged by the lack of liquidity provided by this asset class.


Eurazeo, one of the first private equity firms to open this asset class to individuals

We have always believed that private equity should be open to a wide range of savers, not just institutional investors and very wealthy individuals. As one of the first private equity firms to open this asset class to individuals 20 years ago, Eurazeo now manages assets worth over €3 billion for more than 100,000 individuals. We are one of the few long-established firms to truly support a more democratized private equity landscape, as we believe it is only fair that as many people as possible be able to access this asset class. Having set the minimum initial investment at €1,000 for private clients, we strive to demystify private equity by offering hassle-free, tailored solutions and explaining the lack of liquidity inherent in long-term investments.

To avoid a two-tier system, we strive to ensure individuals have access to the same investment opportunities as institutional investors, offering them vehicles adapted to their needs and constraints. By co-investing alongside funds for institutional investors, individuals can access deal sizes traditionally reserved for professionals, investing in start-ups and SMEs in which Eurazeo invests.

 

Eurazeo Principal Investments, a further step

Today, we are taking another step forward with the launch of Eurazeo Principal Investments, a venture capital mutual fund open to life insurance policyholders and direct investors. After real estate and private debt, this new product focuses on buyout and growth investments, with a portfolio of around 30 companies. Investors will be exposed mainly to European companies but also to some American companies targeting international expansion.

With this new initiative, Eurazeo seeks to enhance access to private equity by simplifying subscription—including using units of account—and ensuring a portfolio is available to savers from the beginning. From day one, Eurazeo Principal Investments will be able to access recent Eurazeo investments in six start-ups representing a wide range of promising sectors—Premium (a wealth management specialist), I-Tracing (a cybersecurity expert), DiliTrust (a publisher of software for legal departments), Altaïr (a producer of cleaning products), Cranial Technologies (an American company that is the leading provider of medical devices for babies with plagiocephaly) and Scaled Agile (a US-based professional training content provider).

Clients who invest in our retail solutions are diversifying their assets and contributing to the real economy. At Eurazeo, we firmly believe that democratizing private equity will enable savers to access higher-yield and more meaningful investments, thereby contributing to the transformation of companies experiencing strong growth, generating thousands of jobs and playing an active role in ensuring a just transition to a sustainable economy.  

 

Disclaimer
This document is for information purposes only. It should not be taken as an advertisement for financial products or as legal, tax or financial advice. Alternative investments are not without risks, such as loss of capital. Eurazeo IM encourages you to read about these risks in the relevant fund rules and brochures. Investment decisions should not be solely based on the information contained in this document, which has not been approved by any regulatory authority. Investors should contact their advisors if they have any questions in relation to the information contained in this document. The information is not intended to be exhaustive and should be considered in conjunction with other relevant literature. Eurazeo IM is committed to providing high-quality information. It reserves the right to update this information at any time without notice. None of the information contained in this document should be taken as a promise, commitment or depiction of the past or the future. Eurazeo Investment Manager accepts no liability for the forecasts, assessments, statistics, surveys, analyses or data presented in this document, which may contain elements of subjectivity. Past performance is no guarantee of future results. No part of this document can be reproduced or disclosed without prior written consent from Eurazeo IM. Eurazeo IM shall not be liable for any unauthorized third-party use of the information contained in this document.
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