Greater numbers of alternative fund managers have been saying that they want retail investors to have access to their funds, although take-up has been slow. “It has been a frustration for many participants in the market,” says Corr, global head of manager selection and due diligence services at Morningstar.
“I used to do venture capital at the start of my career, and the people who were investing in it were always, you know, gazillionaires. It’s always struck me as being a great diversifier in a portfolio that has not being available to retail investors. So the more affluent areas of the investments world benefit, whereas the mass affluent or the younger people don’t get access to it. So I think it’s a good thing if the industry can give retail investors access to private market investments,” he said.
At the same time, “it is a fact of life that many new businesses do not want to come to public markets, because they can’t bear the scrutiny” and administrative workload that comes with a listing, reckons Corr. By the same token, nowadays “the private equity guys, to diversify their client base for business reasons, would like to open these up to retail investors.”
Disappearing demarcation lines
“There is no doubt that the historic lines of demarcation between different financial services firms is breaking down. So the asset managers are getting into wealth management, wealth managers are getting into asset management, insurance companies are getting into asset management, etc.”
Corr points the recently announced acquisition of Interactive Investor, the UK’s second-largest online investing platform, by Abrdn (formerly known and still pronounced as Aberdeen), as an indicator. “They’re not doing that to push Abrdn product through the channel,” he notes. “They’re doing it because they think that that area of the market is growing. There’s evidence that asset management firms and other firms are looking at every part of [the market and concluding that] ‘it’s all up for grabs now. If we don’t move into these other areas, then new entrants are either going to come to do it for us or they’re going to come and eat our lunch’.”
Anastasia Georgiou, director of client solutions for the EMEA region at Morningstar. Photo: Morningstar
New entrants to the markets and new types of investments could draw more retail clients, believes Anastasia Georgiou, Morningstar’s director of client solutions for the EMEA region. “A lot of people think that investing is for people ‘with money’, they don’t think that it’s something that they can do.” But investing, even starting with small sums, is “the best thing” younger people can do.
Build your own
Georgiou expects that mass personalisation will start to gain traction in Europe (it’s already beginning to take off in the US). For example, investors will “customise an index” and essentially create their own ETF. Or advisors will offer “core portfolios, and then the option to potentially swap things out, or bring in some satellite investments to fit with the personalisation.”
This article first appeared in the edition of Delano magazine.