Private equity wants to win over retail investors. Which means that these days there are more ways than ever for individuals to grab a piece of the buyout activity.

The biggest companies in the industry are listed on the stock exchange, including, for the past two weeks, TPG. You can buy private equity products from Merrill Lynch and Vanguard. You can invest in private equity ETFs. You can buy shares of Petershill Partners and Blue Owl Capital, which hold minority stakes in a range of private equity firms and thus function as a sort of benchmark for the industry.

But for most individuals, getting on the ground floor of a large private equity fund is next to impossible. A former KKR managing director named Steffen Pauls is trying to make it a little easier.

Pauls is the founder and CEO of Moonfare, a German startup that allows accredited investors to invest six-figure sums directly into specific funds from some of the biggest names in private equity and venture capital. The company launched its platform in the United States this week, allowing investors with an annual income of $200,000 or a net worth of over $1 million to shop across The Carlyle Group’s individual fund offerings, Tiger Global, EQT, Andreessen Horowitz, Vista Equity Partners and many more. The minimum investment is $125,000, a much smaller sum than what would otherwise be required to obtain such funds.

“In the past, private equity was an asset class reserved for institutional investors and very, very wealthy families,” Pauls said. “What Moonfare does is change access.”

Moonfare plans to add impact and credit funds to its core list of private equity, venture capital and growth vehicles soon. It also operates a secondary market where users can liquidate holdings in the middle of a fund’s lifespan. The company employs a 15-person investment team that combs through a few hundred options each year to determine which funds Moonbase should offer, with around 10% of them.

Investors are eager to put their funds on the platform, Pauls says, because they believe it could be the start of a much bigger business involving wealthy people in the not-too-distant future.

“That’s the key point where we have access to these incredible funds is that the private equity industry is going retail,” Pauls said. “For them, it’s really about unlocking the biggest pool of capital that’s out there.”

Other companies, such as Titanbay and iCapital Network, operate similar services that help the industry tap into this retail pool. Moonfare stands out by catering only to individuals and not to banks, advisers or institutional investors.

Should retail investors even want to invest their money in private equity? Private equity products from companies like Merrill Lynch have drawn criticism in the past, in part because of hefty fees. And there’s a growing debate among researchers about whether the industry’s performance is strong enough to make the fee worth it. In a recent report, JP Morgan Asset & Wealth Management noted that the median buyout fund has only outperformed the S&P 500 by 1% to 5% in recent years, down from a peak of nearly 15% at the turn of the tide. century.

Fees are always a factor for Moonfare, but the company tries to take a lighter hand. Investors pay the usual management fees to a company they invest in, usually around 2%. They also pay Moonfare an additional management fee of between 0.35% and 0.85%, plus a potential one-time fee of between 0% and 1% when initially investing in a new fund. In both cases, the specific rates depend on the specific fund.

And Pauls hopes Moonfare’s fund selection process means its offerings will outperform the median, although investing in just one fund can certainly be risky business. He views private equity and venture capital investing as a game of diversification, a way for wealthy amateur investors to align their own portfolios with those of professionals.

“If you only have a portfolio of bonds and stocks, you’re missing something,” Pauls said.

The United States has recently taken steps to open up private equity even more to the general public. In 2020, the Department of Labor released new guidelines allowing private equity to be included in 401(k) plans for the first time. Last September, an SEC panel recommended that the agency consider possible regulatory changes that would provide “broader access” to private equity for retail investors.

Pauls thinks the changes are good, and not just because they might be good for his business. The private equity industry had its best year last year, with an increase in investor activity and profits. He doesn’t think access to this kind of explosive growth should be restricted.

“I find that absolutely unfair,” Pauls said. “We have unprecedented value creation in private markets, you see it day after day. And 99% of the population is left behind.

Moonfare claims over 2,200 users who have combined to invest some $1.5 billion on its platform. And it has deep pockets, having raised $125 million in funding in November led by Insight Partners, which, as it happens, is another of the companies whose funds can be found on the Moonfare platform.