How PE Gate Is Improving the Traditional Private Equity Investment Model
Private equity (PE) is a leading asset class that has become widely accepted as a key component of investment portfolios. Its major virtue is that it delivers attractive risk-adjusted returns with fairly low correlation to equities and bonds.
However, PE has two major obstacles — high investment minimums and limited liquidity. PE Gate overcomes both obstacles without charging commitment fees, while providing investors direct business ownership and autonomy over investment decisions.
Low Investment Minimums
PE investing has a high barrier to entry due to the typical minimum investment of +$1M. As such, PE has been reserved for ultra high net worth investors, large family offices and institutional investors such as pension funds, sovereign wealth funds and large endowments.
PE Gate reduces minimum investment size to $50k, allowing a larger audience of accredited investors to access this alternative asset class.
Increased Liquidity
Liquidity is a concern for investors in PE. Liquidity measures the ease at which investors can invest or divest investments. PE funds typically impose penalties, and/or limitations on investors’ ability to withdraw their investment, requiring a minimum hold period of typically seven years. In other asset classes, such as stocks, mutual funds, or ETFs, investors can easily sell their investments.
PE Gate provides a proprietary secondary market, allowing its investors to sell all, or a portion of, their holdings after a six month hold period.
No Fees prior to Investment
PE funds charge their investors an annual management fee, typically 2.0% of committed capital, which helps support overhead costs such as investment staff salaries, due diligence expenses and ongoing portfolio company monitoring. This fee is charged irrespective of whether capital has been deployed.
PE Gate does not require financial commitments from investors and does not charge fees until investments are made. An operating fee is charged to the portfolio company as well as a carried interest aligned with investor returns.
Direct Business Ownership and Investment Autonomy
When you invest in a PE fund, you are investing in a fund managed by General Partners (GPs). The GPs make all investment decisions on behalf of the fund and its investors, or Limited Partners (LPs). LPs have no autonomy over investment or divestment decisions and are not involved in selecting which businesses to invest in.
PE Gate provides each investor the opportunity to make their investment decision on a deal by deal basis with direct ownership in the business they invest in. Although PE Gate acts as the GP, investors have full autonomy on invest decisions posted on PE Gate’s platform.
A Summary of How PE Gate Differs From Traditional PE Funds
Lower minimums ($50k vs +$1M)
Increased liquidity (min. hold period of 6 months vs 7-10yrs)
No upfront or commitment fees
Autonomy over investments decisions
