Retail investor access to private markets in Europe has significantly increased due to new regulations and initiatives. The developments led by Hargreaves Lansdown in the UK raise new questions about opportunities and risks.
Transition to Private Markets
Retail investors in Europe are starting to actively participate in private markets, which was unimaginable just a decade ago. Hargreaves Lansdown, the largest DIY investment platform in the UK, in partnership with Schroders Capital, offers access to Long-Term Asset Funds (LTAFs) through self-invested personal pensions and general accounts. The minimum investment amount is £10,000, allowing access to private investments in global private equity and energy infrastructure.
Advantages and Opportunities of Private Markets
Private markets offer investors access to unlisted companies and infrastructure projects, helping to avoid daily fluctuations in public equity. Emma Wall, head of platform investments at Hargreaves Lansdown, notes that the launch of these opportunities is a 'milestone' making private markets more accessible. Participation in private equity can drive economic benefits, especially as traditional IPOs become less frequent.
Risks and Precautions
Despite the optimism, experts warn of risks associated with liquidity since private assets cannot be easily sold. Withdrawal notice periods can extend up to 90 days, which is unsuitable for those needing quick access to cash. Additionally, Moody’s Ratings emphasizes potential mismatches: in times of stress, retail investors may rush to exit, leading to liquidity shortages.
The expanding access to private markets in Europe opens investment opportunities for retail investors. However, the risks must be carefully weighed, and appropriate investor education is necessary to avoid overestimating rewards and underestimating risks.
