Moonfare shares insights from its investor base and how their private equity choices have evolved over the last three years. Photo: Shutterstock

Moonfare shares insights from its investor base and how their private equity choices have evolved over the last three years. Photo: Shutterstock

Moonfare, a Berlin-based fintech company, has released its inaugural private equity pulse report, which provides insights into trends among its investor base and private equity fund managers on its digital investment platform.

The report, PE Pulse, draws on data from more than 2,660 individual investors who collectively invested $2.1bn across 74 feeder funds available on the Moonfare platform between 1 January 2020 and 31 December 2022. The investors analysed in the report were based in Europe, the US and Asia.

Recession-resilient strategies gain traction in private equity

Private equity investors have been exploring recession-resilient strategies, particularly in the form of secondary opportunities, as a way to manage risk during economic downturns.

According to data from Moonfare, in 2022, 12% of all allocation value was targeting secondary opportunities, compared to only 6% the previous year. This trend is in line with the sentiment captured in Moonfare’s Investor Survey, where 37% of respondents identified secondaries as one of their top three considerations.

The potential appeal of secondary strategies lies in their ability to provide investors with an option to exit their private market positions prematurely, allowing them to better manage cash flow during periods when capital calls often outpace distribution activity.

On the other hand, secondary buyers may capitalise on discounted prices and benefit from the reduced risk of a blind pool, as the investments underlying a fund are typically known and can be better evaluated.

Furthermore, fund managers are increasingly employing secondary vehicles to extend ownership of prized assets beyond the typical holding periods, allowing them to postpone selling portfolio companies when M&A markets are more muted.

Millennials’ increasing appetite for private equity

Millennials, particularly those with emerging wealth, are increasingly allocating to private equity as they seek to maximise long-term wealth through higher-returning but higher-risk assets.

Data from Moonfare shows that the share of investors in Moonfare feeder funds who are younger than 35 has been steadily increasing, with the number of allocations invested by people between 25 and 34 years of age doubling in 2022 compared to two years prior.

At the end of 2022, investors younger than 35, by number, made around 12% of all allocations through Moonfare.

This trend is consistent with a broader trend of younger and more risk-tolerant investors seeking alternative investments, including private equity, cryptocurrencies and direct investments in companies, to capture extra upside potential.

Millennial private investors also seem more interested in Moonfare portfolio solutions compared to older and presumably more experienced investors, with the appeal of these products for first-time private equity investors lying in their diversification benefits and lower minimums.

PE becomes a ‘tech-first’ asset class

The private equity landscape has seen a notable shift towards technology investments, with leading fund managers adopting a ‘tech-first’ approach. While technology investing has traditionally been associated with venture and growth strategies, recent years have shown that buyout funds are also increasingly allocating capital to the information technology sector.

According to Moonfare’s data, information technology accounted for more than 50% of initial investments made by buyout firms in the first three quarters of 2022, compared to less than a third in 2020 and 2021.

This shift towards technology investments is driven by the potential for cutting-edge innovation and growth in the technology sector, as well as the desire for equity control in companies at the forefront of technological advancements.

The report was by Moonfare on Wednesday 19 April.