A London-based startup which hosts venture capital funds has begun to enter into partnerships with wealth managers who want to give their clients access to a broader array of assets.
Sprout, an investment platform which launched just over a year ago, wants to eventually become the go-to place for people investing in private markets.
While some firms are talking to Sprout on an informal basis, allowing individual advisers to choose whether or not they want to use the platform, others - generally bigger wealth managers across the UK and abroad - are considering more formal relationships with the platform.
Sprout’s co-founder and chief executive, Jonny Blausten, is a former mergers and acquisitions consultant. He worked on deals such as General Atlantic’s investment in Gymshark back in August 2020, which took the British sportswear group to unicorn status.
Mohit Kirpalani Lalwani, Sprout’s head of relationships, is a former financial adviser. For over three years, he was a partner at St James's Place Wealth Management based out in China.
“I always got questions from clients on alternative assets. The volume of clients asking about it has increased substantially,” Kirpalani Lalwani told FTAdviser.
“This is something wealth managers aren’t offering their clients. A lot of them are looking at us to invest their own money, then actively referring us to their more sophisticated clients.
“More and more wealth managers are also advocating VC as a diverse asset class. It’s outperformed the FTSE for 20 years now.”
Right now, however, some have pointed to a ‘silent venture capital crash’. Shares in some of the tech industry’s largest startups - particularly buy now, pay later companies like Klarna and Affirm, have fallen dramatically in recent months.
But despite this year’s market volatility, which has also hit equities hard, alternative investments - which are made up of a mixture of private equity and hedge funds as well as venture capital - have become a major growth area for traditional asset managers.
In May, Franklin Templeton agreed to buy Alcentra, one of Europe’s largest credit managers in a deal worth up to $700mn.
Private assets tend to command higher fees, securing investors’ capital for several years. Simultaneously, traditional 60/40 portfolios - which consist of equities and bonds - have begun to fall as asset managers look to alternatives.
Growth in alternatives has gained such a pace that the Financial Conduct Authority recently warned fund managers of alternative assets against “bypass[ing]” their own processes in order to grow sales and the number of assets on their books.
‘You’re building a portfolio with a low percentage to go big’
Exposure to VC is very low for investors, Sprout’s boss Blausten explained.
“We’re starting to see the stories of startups unfold…And you’ve got a financial awakening in millennials. They’re much more savvy. Throw tech on top, and there’s a whole range of people waiting to be engaged,” he said.