Tag Archives: Apollo

Private Equity Mini Series (5): Trade Republic offers Private Equity for the masses (ELTIFs) -“Nice try, but hell no” 

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Previous episodes in this series:

Private Equity Mini Series (1): My IRR is not your Performance
Private Equity Mini series (2) – What kind of “Alpha” can you expect from Private Equity as a Retail Investor compared to public stocks ?
Private Equity Mini Series (3): Listed Private Asset Managers (KKR, Apollo & Co)
Private Equity Mini series (4) : “Investing like a “billionaire” for retail investors in the UK stock market via PE Trusts

Management summary:

In this post of the “Private Equity Mini series”, I look a little bit deeper into a Retail Private Equity offering (ELTIF) that has been distributed to 10 mn clients of German Neo Broker Trade Republic since last week (including myself).

There were a lot of articles in the German press trying to explain the product and the associated fees, which in my opinion were mostly wrong. Not surprisingly, as it is extremely difficult to find out what these vehicles actually charge in fees and costs. I’ll therefore concentrate only on the fees and expected returns.

As a spoiler, I do not think that the return expectations of 12-15% p.a. net after fees and costs are anywhere close to reality. I would go as far and even call this “miss selling” as these levels would be “best case” outcomes in my opinion.

Fees and cost based on my estimates will be between 4-7% p.a. (for the deal that I analysed) depending on the performance of the underlying assets and overall returns are dragged further down by the required cash allocation.

I also think that the regulator should here require a full and fair disclosure of Total Expense ratios (including all fees and costs) for different gross return scenarios. For a normal investor, it is close to impossible to gain this information, even for a professional it is hard to estimate based on the provided documentation.

Due to the effort of analyzing the fee structure, I did not have the motivation to look into issues like liquidity windows, early redemption panalties etc. as it just makes things worse for the retail investor.

In the case of the analyzed “Single Manager” EQT Nexus product, the whole purpose of giving private investors access to Private Equity is an actual waste of time, as investors can easily get a very similar exposure with a much better return/risk profile simply by investing into the underlying share of EQT.

In any case, a low cost, diversified Equity ETF will most likely outperform these retail Private Equity structures significantly in the mid- to long term. Although I have analysed only one fee structure, I do think that the main take-aways are applicable to most similar “Semi liquid” structures targeted towards retail investors.

Here is the “full monty” on 18 pages if you are interested in the details.

EQT Nexus.docx-1Download

I have a link for the fee model in the pdf but you can also send me an Email/message if you like to receive it.

Private Equity Mini Series (3): Listed Private Asset Managers (KKR, Apollo & Co)

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Background:

After part 2 of the Private Equity Mini series a few days ago, I wanted to focus on how to access the asset class as a private investor via the “normal” capital markets.

Currently, the PE industry and the broader “Private Asset” industry is massively trying to lure private investors into its Fund offering via a variety of “NEW” and usually structured instruments, such as “ELTIFS” in Europe or lobbying hard in the US to get access to private investors.

In the past, Private Assets, including its subgroups like Buyout, Venture, Growth, Infrastructure and Private Credit were “exclusive” to larger institutional investors and Ultra High Net Worth individuals.

These days, with declining commitments from those traditional investors, the PE industry now tries to access the vast pools of money that smaller, private investors collectively own.

Often you hear the pitch that now is the time to “democratize” the asset class, which is an expression that should make the targeted investors extremely nervous. I had linked to the excellent Bain PE report already in one of the link collections.

A key slide of the report is the one that shows that for the Buy-out category, 2024 was the first year ever with declining AuM:

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