More Millennial investors are participating in private equity markets, according to a report, as younger and risk-tolerant investors are seeking to maximize long-term wealth by allocating to higher-returning but higher-risk assets. This makes a lot of sense as public markets have declined, and private firms seek to remain private for as long as possible due to the exorbitant cost of compliance which is slated to increase further as new rules are added. Private equity was inclusive of venture capital.
Moonfare has published a report that states the share of investors in its feeder funds who are younger than 35 has been steadily increasing. This is said to be indicated by the allure of private securities for younger investors that are “emerging wealth holders.”
“The number of allocations invested by people between 25 and 34 of age has doubled in 2022, compared to two years prior. Overall, at the end of 2022, investors who were younger than 35 made around 12% of all allocations (by number),” stated the report.
Moonfare is a proponent of private equity investing, seeking to build the “world’s most engaged investor community to inspire investments that drive the world forward.”
The Moonfare Pulse reviewed 74 feeder funds from January 1, 2022, to December 31, 2022. Eligible investors had to meet certain criteria to qualify with individuals based in the US, EU, and Asia.
The report states that 2021 was dominated by growth opportunities. It should come as no surprise that individuals with greater wealth also participated in higher-risk – higher-reward investments like venture capital.
The document states that 16% of individuals who reported having a financial portfolio worth more than $25 million are invested in venture capital funds. Correspondingly, just 6% of investors with assets valued below $500,000 are participating in venture capital offerings.
Moonfare shares that Q4 2021 was a peak for their platform as 358 initial investments were made, committing $43+ billion. In Q3 2022, 128 initial investments were made for $19.2 billion.
As for fund strategy, venture investments and secondaries grew the higher the wealth status.
For investors with more than $1 million in investable assets, almost 75% held at least 10% of their portfolio invested in 2021 – up from 50% in 2018.
Moonfare notes that starting in 2021 and continuing in 2020, strategies shifted to more “recession resilient” investments.
As larger investors have jumped to the head of the investment queue, learning to commit capital prior to a public offering to drive gains, smaller investors will seek to do the same over time – as long as policymakers allow it.