The move makes the traditionally tough-to-access asset class available to select retail investors using Wealthsimple’s investment platform. Wealthsimple Private Equity is being delivered in the form of a new fund managed by Switzerland-based co-investor LGT Capital Partners, the Liechtenstein royal family’s wealth management group.
“Canadians are eager to explore these investments.”Ben Reeves, Wealthsimple
PE now marks Wealthsimple’s third alternative investing option for retail investors, alongside its venture capital (VC) and private credit offerings. Through these options, Wealthsimple aims to give qualified retail investors access to asset classes typically available only to institutional investors and the ultra-wealthy.
“We’re very much a money management platform for everyone—no matter how much you have, we’re here to help you get started,” a Wealthsimple spokesperson told BetaKit. “But we have a very diverse client base. Many are committed, long-term investors and at a point in their journey where they’re seeking innovative, sophisticated investment opportunities. We want to deliver for them as well and we recognize there are other ways to reliably outperform, like private investments.”
Founded in 2014, Wealthsimple got its start as an investment platform before expanding into other areas, including spending and saving, cryptocurrency, taxes, and peer-to-peer payments. The startup—which saw growth during the pandemic amid a rise in retail investing—launched a unified super app last summer, bringing its various FinTech offerings under one roof.
In May 2021, Wealthsimple raised $750 million CAD from a list of big-name backers at a post-money valuation of $5 billion, making it one of Canada’s most highly-valued tech startups. Since then, market conditions have deteriorated and Wealthsimple has adjusted its hiring plans, laid off staff, made executive changes, and seen its valuation cut amid the tech downturn, which has been particularly tough for FinTech startups.
Despite this turmoil, Wealthsimple grew its client base by 16 percent to two million (excluding tax filers), according to Wealthsimple investor Power Corporation of Canada’s 2022 report. However, its assets under administration (AUA) as of December 31, 2022 also fell slightly to $18.3 billion, a $100-million drop compared to 2021, per the report.
Most recently, as of September 30, 2023, Power Corp reported that Wealthsimple had AUA of $24.9 billion—a 42 percent climb compared to the same period last year—and 2.3 million clients. Counting Wealthsimple Tax users, Wealthsimple currently caters to over three million customers across Canada.
Back in April 2022, as part of a push to cater to longer-term retail investors with higher risk tolerance, Wealthsimple announced Venture Fund I, teaming up with United States-based Accolade Partners to give its clients access to pre-initial public offering tech companies via investments in other VC funds. This March, Wealthsimple followed that up by partnering with Power Corp-affiliated Sagard to give customers the ability to invest in “institutional-grade” private credit.
“Canadians are eager to explore these investments,” Wealthsimple chief investment officer Ben Reeves said in a statement. “Thousands of our clients are investing in our alternative investing offerings to date. In only a few months, Wealthsimple Private Credit has already reached $130 million all from suitable retail investors.”
Wealthsimple said that its new PE offering is not suitable for all of its customers. It is making Wealthsimple Private Equity available to clients with at least $100,000 in deposits who are investing over “a long enough time horizon to ride out volatility,” and possess the flexibility necessary to contend with the fund’s relative illiquidity compared to other asset classes.
Historically, investing in PE has involved more risk but generated greater returns than public stocks. Wealthsimple has taken a few steps to mitigate some of the risks associated with private equity. These include selecting a fund that invests only in the secondary market at a discount, or at market prices for new direct investments, which Wealthsimple claims avoids some of the issues associated with other open-ended PE funds.
On the de-risking front, the FinTech startup has chosen to partner with LGT Capital Partners, which Wealthsimple said “uses less leverage than the industry average,” as a fund manager and co-investor.
“As a principal investor, we have a long-term investment horizon and invest our own capital alongside our clients, resulting in a strong alignment of interests,” LGT Capital Partners partner Sascha Gruber said in a statement.
Feature image courtesy Wealthsimple.