Wealth Club, Britian’s biggest non-advisory investment service for high-net-worth investors, has launched the UK’s first dedicated Private Markets Self Invested Personal Pension (SIPP)
As volatility hits stock exchanges, private markets offer a much needed mind-shift to long term investment horizons
UK individuals can now invest in a range of top private equity funds from some of the world’s leading managers including Brookfield, CVC and EQT, in their pension from just £10,000
Investors can transfer existing pensions or make new contributions
From the outset, there will be 12 funds from 10 managers across private equity, venture, multi-asset, secondaries, infrastructure and private credit, with a considerable pipeline of funds to come
Alex Davies, founder and CEO of Wealth Club:
”This is a great opportunity for experienced investors to add a slice of private markets to their pensions. It marks a big shift in access to this part of the market, which has until recently been largely the preserve of institutions and the ultra-wealthy. Wealth Club has been offering private market funds to investors outside of a tax wrapper for just over a year. Now this high-performing asset class will be accessible to a much wider pool – in a pension”. Right now, as volatility hits public markets, investing in private markets could provide a much needed investment shift – the opportunity to turn off the noise and concentrate on long-term investment horizons.
In times of turbulence time in the market, not timing the market is super important. Private market investments by their very nature are long-term and should help investors ride out the disruption. History has shown that private markets are largely stripped of the emotions which dominate and drive public markets in times of conflict.”
Why is it so important?
“According to data from Hamilton Lane, over the past 25 years, the average private equity fund has outperformed the average global equity fund by 6.2% a year net of fees.
Investors can now access this opportunity through their pensions – alongside managers such as ARK, Brookfield, CVC, and EQT – investing in everything from companies like SpaceX, to slim drug autoinjector pen maker, SHL Medical, as well as critical infrastructure and data centres.
The launch comes at a time when public markets are shrinking and increasingly concentrated – of the 159,000 companies globally that generate more than $100 million in revenues, just 19,000 are listed, and a handful of stocks now drive a large share of returns.
With more companies either staying private for longer or opting to delist, investors risk missing a growing part of the opportunity set.
The Wealth Club Private Markets SIPP combines this access with powerful tax benefits, including up to 45% income tax relief meaning a £10,000 investment could cost as little as £5,500.”
How do I transfer funds in/open a SIPP?
“For those interested in accessing the Private Markets SIPP, they can make a lump-sum contribution (and get up to 45% income tax relief) or transfer funds from an existing pension, without investing any new money. Transfers are possible from most types of private pensions, including personal and stakeholder pensions, old or current work pensions and other SIPPs. To start a transfer, investors simply provide the details of the pension they wish to transfer. Wealth Club takes care of the rest. Investors do not need to transfer their full pension.”
How big is the potential market?
“Largely functioning as the pension home for wealthier, more sophisticated investors, the SIPP market is projected to hit £1 trillion by 2030. If just 10% of these assets ended up in private markets – a fairly conservative estimate given that institutions and ultra-high-net-worth investors typically allocate in the region of 20% to 30% – private markets are likely to play a very significant role in many people’s pension pots in the future.
Private equity managers increasingly recognise the scale of this opportunity and are building products designed specifically for private investors. Semi-liquid funds, while still long-term in nature, remove many of the barriers that previously restricted access to all but the most sophisticated institutions.”
Risks and need for diversification
“Private market investments can help to greatly diversify a portfolio, providing exposure to a range of asset classes including private equity, private credit, private infrastructure and private real estate. Whilst Private equity may provide exposure to a whole raft of companies not available in public markets, private infrastructure investments may bring greater asset backed resilience and inflation protection to a portfolio.
The benefits of greater diversification must be weighed against the risks. Any private market allocation should be made as part of a broader pension investment strategy. Additionally, investors should be mindful of the risks of illiquidity and complexity.
Semi-liquid private markets funds are unlike conventional funds available through mainstream platforms. They are designed to limit investor withdrawals each quarter if withdrawals exceed a certain threshold, typically 5% of a fund’s value. This is to protect the fund and its investors from selling illiquid assets to fund redemptions. These funds are designed for long-term investors that do not require daily liquidity. For investors comfortable with these risks, there is a range of world class private market managers to pick from.”