Funds Europe – How do you see the responsiveness of regulators to that argument? Does it vary from territory to territory? Is it going to be tough convincing them?
Pesch – This is a whole industry effort that also has to be discussed with different regulators. It is important to go gradually, to do it in a robust way. You would certainly not be happy to hear about some disappointed investors or reputational problems afterwards because it was overpromised.
Secondly, we need to really underline this value creation process, which we mentioned before. It takes time. For us, it’s really the geniuses of finance meeting with the best entrepreneurs.
Allright – Education is really important for the retail market. Maybe it is incumbent on industry practitioners in private markets to do it.
Funds Europe – What are the big headwinds to democratisation?
Nicoll – Education and regulation. I spent a decade before the financial crisis educating institutional investors, then the financial crisis came along, and private markets made more sense. It gave a big fillip to the whole thing.
Wholesale markets as a whole are not educated on private markets yet, as there haven’t been easily available products that they can talk and think about.
Regulation is always a risk. You could argue that some bits have been under-regulated. It hasn’t necessarily led to bad outcomes because institutional investors were making up most of the allocations, and the market has been quite disciplined on the level of due diligence and discussions.
That is no longer the case if you have investors who may not fully understand what you are selling.
Funds Europe – Could the UK regulator learn from its experience with Treating Customers Fairly or other forms of investment that they can apply to private assets?
Nicoll – Yes, and in some ways, we might get divergence across Europe. There are a lot of governments around the continent that are trying to work out how to get more money – whether that’s pension or insurance money – to go into VC or private equity or private capital, which may also drive the regulator.
Pesch – On the educational side, we need to push that. We need to find partners willing to share their expertise, to explain it in simple words, to underline differences, to be ambassadors of the different asset classes, and also be as transparent as possible. The better the products that we package and sell, the more likely we will keep investors, because happy investors always come back and bring others with them.
Concerning regulators, that’s also part of the job of the entire industry. When we explain strategies, at conferences or elsewhere, we should also invite the regulators. It’s helpful to be open and transparent on those elements and to facilitate that knowledge-sharing.
Degosiu – I fully agree. Also, for finance students, there is still room for improvement. Everybody here can be active on this. We are now trying to talk to universities and offer workshops on private markets.