Private equity and venture, bankable.

Private equity and private debt are among the most important components of the alternative investment universe. Both offer professional and institutional investors a way to improve the risk and reward characteristics of a portfolio, with the opportunity to generate higher absolute returns while improving diversification.

Despite that, many market participants still hold little or no exposure, because both involve non-listed companies and direct, private investments. Opportunities are hard to find or access without the right network. Minimum ticket sizes are high, as is the legal complexity and cost of carrying out the transactions. Asset managers looking to offer private-market products to their clients meet the same hurdles.

Traditionally the only routes were to invest directly, if you could source the opportunity, or to go through a fund. Direct investments, limited partnerships and funds all consume substantial time and resources to set up, maintain and keep within the regulatory framework, which shows up as a high total expense ratio.

Securitization turns illiquid assets, including private investments, into investable securities. A special purpose vehicle raises cash from a pool of clients or investors, usually as an actively managed certificate or a tracker certificate, which is then used to subscribe or invest directly in the underlying.

Issued from a protected cell company, both offer the ease of setup of a structured note combined with the asset segregation and corporate governance more familiar from a fund. The difference between them is what you are giving investors access to.

• Actively Managed Certificate. Access to a portfolio of private investments, customizable for every strategy according to the segregation needs of the asset manager or client.
• Tracker Certificate. Shares in a privately held company offered to selected investors, with a tailor-made issuer allowing a certificate per deal or group of deals.
• One set of documents. The asset manager is the sole investor, which is what keeps the operation simple.
• Full transparency. The manager can always see the full balance sheet of the product.
• Investor privacy. Investors typically hold through their bank, which keeps their personal information. The owner of the underlying assets does not, and cannot, know who the investors are.