Canada’s Sagard Holdings is launching a private equity fund aimed at retail investors, marking a significant move as alternative asset managers expand their focus beyond institutional clients and ultra-high-net-worth individuals, according to a report by Wealth Management.
A subsidiary of Power Corp. of Canada, Sagard will target Canadian accredited investors with a minimum of CAD1m ($695,000) in financial assets or more than CAD200,000 in annual income for its new offering, Sagard Private Equity Strategies LP.
Last year, Sagard introduced a private credit fund for this investor group, which had over CAD90m in assets under management as of November. The firm also oversees a credit fund with over CAD43m for Wealthsimple Financial, an online investment platform also owned by Power.
Sagard CEO Paul Desmarais III explained that the firm typically raises private equity funds with a minimum investment of CAD10m. However, the retail-focused fund will have a much lower entry point of CAD25,000.
“We’re looking to democratise access to what we think is the most important part of the investment industry for the next decade,” Desmarais said in an interview.
Despite retail investors holding over 50% of global wealth in 2023, they accounted for just 16% of the alternative assets under management—around $4tn—according to consulting firm Bain & Co. As alternative asset managers face challenges in attracting institutional capital, they are increasingly targeting retail investors.
Last year, BlackRock and Partners Group Holding AG partnered to create a “one-stop portfolio” that allows retail investors to access a variety of private assets. In September, Brookfield Asset Management announced plans to launch a private equity product for wealthy individuals.
“The product construct for the wealth channel is different,” Desmarais said. “We were thoughtful in how we built it because you need diversification, and you need liquidity.”
Sagard, along with some clients, will initially seed the fund with CAD50m, primarily for acquiring stakes in middle-market private companies. The fund aims to generate long-term annual net returns between 14% and 18%.
Management fees are set at 1.5%, with performance fees of 12.5% above an 8% hurdle.
“We’ve really spent a lot of time building this specifically with investor liquidity in mind,” he said. “But financial advisers will typically only recommend these funds to investors who don’t need their money near term because the truth is that the underlying assets are still illiquid. That’s something investors considering investing in private equity have to keep in mind.”
Thanks to a combination of organic growth and the acquisition of Performance Equity Management, Sagard’s assets under management surpassed $27bn last year.
