Achi news desk-
BMO’s asset management arm plans to launch the BMO Carlyle Private Equity Strategies Fund around May. Towers of the TD Center (left) and Bank of Montreal, in Toronto, on December 6, 2017.Fred Lum/The Globe and Mail
Bank of Montreal BMO-T joins Carlyle Group Inc. CG-Q to launch a fund targeting high net worth clients, as part of a drive to open private asset markets to a wider variety of individual investors.
BMO’s asset management arm plans to launch the BMO Carlyle Private Equity Strategies Fund around May. The bank, which announced the partnership with the US private equity giant on Friday, is pitching it as a way for individual investors to buy and sell a fund exposed to a variety of private equity investments that are usually commitments long-term, available only to the largest and ultra-wealthy organisations.
Where most traditional private equity funds lock up investors’ money for years, the BMO Carlyle has no fixed end date and has monthly windows when investors can redeem at least some of their money, within limits. The fund also has a relatively low minimum investment of $25,000.
When launched, the BMO Carlyle fund will be a companion to one that BMO launched last year as a joint venture with Swiss private equity firm Partners Group AG. That fund, which opened last June, invests in a mix of infrastructure, real estate, private equity and private credit assets, and is marketed as a one-stop way to gain broad exposure to private markets.
Between June and December 31 last year, the BMO Partners Group fund attracted $131-million from about 1,000 individual investors. Most often, those were investors with $1 million to $10-million in assets, although it also attracted ultra-high-net-worth investors and some mutual fund clients from asset manager BMO.
Meanwhile, the BMO Carlyle fund will offer strict exposure to private equity, mainly through secondary investments – stakes in a wide range of funds bought at a discount from earlier fund investors – with some direct investments and co-investments in new private equity deals .
“You get access to institutional-quality private markets in a buy-when-you-want, sell-if-you-need format,” Jeffrey Shell, head of alternative investments at BMO Global Asset Management, said in an interview. “Our hope is that over time, this will be our next great success story alongside ETFs,” or exchange traded funds.
The market for private assets has been exploding in size, with private capital under management in North America reaching US$7.7-trillion last year, including US$3.6-trillion in private equity, according to data from Preqin. Major private equity investors have been rushing to create investment products tailored to retail investors, seeking to tap into a vast source of wealth with the promise of higher returns than stocks and public bonds.
In joining Carlyle, BMO trades on the merits of the private equity heavyweight, with US$426-billion in assets under management, including US$66-billion through its Alinvest division, which will manage the BMO Carlyle fund. In return, Carlyle gets quick access to the Canadian market through BMO’s established brand and a large network of advisers to market the fund to clients.
Carlyle’s head of Wealth Strategy, Shane Clifford, said in a statement that the partnership with BMO “is a significant milestone for Carlyle’s wealth business in Canada, as we continue to expand our reach in the channel globally.”
The secondary market for selling private equity stakes is booming, in part because many of the world’s largest institutional investors are trying to reduce their exposure to private equity in order to stay within target allocations. Private equity has also been going through a rough patch, as high interest rates put a chill on deal-making, making it harder for private equity investors to sell portfolio companies and return cash to funding investors.
That creates an opportunity for secondary specialists such as Carlyle’s Alinvest, as large investors look to sell fund stakes at a discount to raise cash. And because private equity investors don’t want to crystallize losses from potentially struggling assets in their portfolios, “what they’re selling now, and what’s clearing in the market, are the very best assets,” said Mr Shell.
One of the challenges in attracting retail investors to private markets is convincing them that they are getting real access to those high-quality assets, which have historically been reserved for multi-billion dollar investors. Mr Shell said that BMO chose to work with Carlyle because of the thorough way in which it assigns assets to its funds, and its experience in doing the work to make companies more valuable.
“They don’t say, ‘Okay, this is a great investment, it’s going to the biggest organizations in the world. Whatever’s left, we’re going to put it into a retail vehicle.’ That’s not how they operate,” said Mr Shell. “They have a fair process where all the best assets go where they are needed.”
Ad blocking test (Why?)
Source link
Related
