Ah, private equity – the exclusive club for the ultra-wealthy, the financial elite, the ones with the magic key to high returns. Traditionally, you’d need a cool 100,000 euro and a long-term commitment just to get a foot in the door.
But now, a Berlin-based firm founded by a former KKR executive is offering a golden ticket for the masses with its new app, making private equity investing as simple as ordering a pizza. And just like ordering a pizza, this experience might leave you feeling a bit queasy afterward.
Democratic market
Moonfare’s new app, launched on the AppStore for German investors with the rest of Europe planned later, promises to democratise private equity. With a minimum investment of just 10,000 euro, it seems almost too good to be true. Private equity for the people!
But before you dive in headfirst, let’s remember that private equity is an expensive asset class with risks that differ significantly from your average ETF or mutual fund.
Engaging or addictive?
App-investing certainly has a higher level of engagement, and could even be addictive. Research shows that retail clients using bank apps check their balances about seven times a day (UK Finance), and investors using apps do so four times daily (Vanguard).
This compulsive behaviour is exactly what Moonfare is banking on. Imagine the thrill of watching your high-stakes private equity investments fluctuate in real-time. It’s like turning your phone into a financial roller coaster – just without the safety harness.
At what cost?
Moonfare’s app offers a slick user experience with features designed to make private equity investing seem as easy as pie:
- Quick registration: Fast and efficient sign-up to get you hooked.
- Digital onboarding and ID verification: A seamless process to pull you in.
- Fund details page: Comprehensive info to make you feel informed.
- Digital collection of personal information: Convenient and secure data collection.
- Digital signing/acceptance of subscription documents: Paperless and painless.
- Digital reporting: Detailed quarterly reports to keep you on the edge of your seat.
- In-app educational material: Resources to reassure you that you know what you’re doing.
All these features are designed to give you a sense of control and transparency, but let’s not forget – private equity is inherently risky and illiquid. The glossy interface doesn’t change that fundamental truth. PE investments typically cost two percent per year, significantly more than traditional funds and ETFs, which in many cases also are offered for free to retail investors.
Liquidity: A mirage in the desert?
Private equity investments are typically locked up for the long term, but Moonfare teases with the promise of early liquidity after a two-year holding period via a periodic digital secondary market. This sounds great, but early liquidity in private equity is often limited and far from guaranteed. Think of it as a mirage in the investment desert – it’s there, but you might not ever reach it.
Word from the top
Moonfare’s founder and CEO Steffen Pauls, who formerly headed U.S. private equity heavyweight KKR in Germany, is naturally optimistic.
“It has been my dream since the day I launched Moonfare to make the investments we so carefully curate directly available to eligible retail investors,” he said in a press release. ”Users will find the same level of curation, due diligence, digital experience, and education via the app as existing investors enjoy on our online platform.”
Translation: We’re giving everyone a shot at the high-stakes game, but don’t forget, it’s still a game where the house often wins.
To be fair, Pauls, in this interview with Investment Officer earlier this year, did point out that the PE business has moved on from its controversial track record: “That complaint is familiar and not entirely unjustified,” he said back in April. For most of the industry, he said, “that has fundamentally changed”.
Risky reality
Moonfare’s European Long-Term Investment Fund (Eltif) aims for a diversified portfolio, spreading investments across around 50 companies. This diversification is supposed to stabilise returns, but let’s be real – private equity is not for the faint-hearted. It’s a high-risk, high-reward world that can be thrilling on the way up and gut-wrenching on the way down.
The Moonfare Machine
From its Berlin offices, Moonfare provides eligible individual investors, family offices, and their advisors with access to private market investment opportunities.
To date, Moonfare has offered over 110 private-market funds managed by prominent general partners such as KKR, Carlyle, and EQT. Its investment approach has attracted nearly 4,500 clients who have collectively invested over three billion euro, That’s a lot of money moving around, and while it sounds impressive, remember: this is private equity, where fortunes are made – and sometimes lost – in the blink of an eye.
Cautionary conclusion
Moonfare’s new app might make private equity investing as easy as ordering a pizza, but just like that extra-large pepperoni with extra cheese, it comes with consequences. The democratisation of private equity sounds wonderful, but it’s crucial to remember that this isn’t your typical index fund.
It’s an expensive, risky asset class with a different profile than traditional investments. So, before you hit that download button and invest your 10,000 euro, make sure you’re ready for the ride – it might be a bumpy one.