With a new segment on its digital investment platform, Scalable Capital is setting new standards for investors: Soon, suitable investors in Germany will get access to alternative investments such as private equity.
Through the Scalable Broker, they will be able to invest in companies that are not listed on stock exchanges for the first time. Until now, benefiting from this additional return and diversification potential has been primarily reserved for professional investors. At the start of the new offer, Scalable Capital is the first digital investment platform to offer access to the BlackRock Private Equity Fund. The fund is managed by BlackRock, one of the world's leading private markets investors trusted to manage 450 billion US dollars in alternative assets.(1) After a minimum one-off investment from 10,000 euros, the fund is also available in a savings plan. There are no front-end loads for the fund. This is a further step in the endeavour to open up the entire investment spectrum to long-term oriented investors for their financial future.
"As alternative investments such as private equity are becoming increasingly relevant for participation in economic growth, we now make them accessible to our investors," says Julius Weller, Vice President Broker at Scalable Capital. "With the expansion of our investment platform to include this segment, clients gain access to the high return potential of private companies. We also achieve the favourable terms and simple handling for private equity that Scalable Capital is known for."
An attractive, strongly growing investment market outside of the stock exchanges
Globally, the vast majority (88%) of companies with a turnover of more than 100 million US dollars is privately held - hence not listed.(2) Making these companies investable creates a huge new investment universe that could continue to grow in the coming years, as the share of listed companies has been continuously declining for two decades. In Europe, the number of listed companies has fallen by almost 23% since 2009, while the number of private companies has risen by over 17%.(3) Germany showcases a distinct extreme in relation to this development. Here, over 98% of companies with more than 100 million euro turnover are privately owned.(4) These include numerous ‘hidden champions’ that are global market leaders in their field and represent the strength and innovative power of mid-market enterprises. Companies worldwide instead of going public prefer to remain private completely or significantly longer than before and are increasingly financing themselves via private equity. One reason for this shift is the growing need for long-term financing that private equity can offer, to adapt to advancements like artificial intelligence; additionally, accessing this capital has become more attainable. Private equity also offers more flexibility in the development of business models and strategies, contrary to what was often assumed in the past. As a result, a large part of economic value creation is shifting to the private markets. Their invested volume almost quadrupled globally between 2013 and 2023 to USD 15 trillion and is expected to rise further to USD 29 trillion by 2030.(5)
Accordingly, the demand for private equity is increasing, as the asset class offers suitable investors additional investment opportunities to diversify their portfolio with high return potential. For investors who have a long investment horizon, not needing to access their money in the short term and with the corresponding risk capacity, private equity has achieved 14.9% annual growth in US dollars over the past 20 years - outperforming the popular MSCI World Index.(6) In the context of asset allocation, analyses from the BlackRock Investment Institute indicate that a mix of private market investments can be sensible at up to 20% of a portfolio. Such an allocation to a traditional portfolio with 60% stocks and 40% bonds shows a better risk-return profile in historical comparison: the expected return increases from 5.5% to 7.2% over a ten-year period, while the risk disproportionately rises from 11.3% to 12.7%.(7) This return potential is now made available to Scalable Capital clients with the respective risk capacity.
Long-standing expertise in modern fund structure
The BlackRock Private Equity Fund focuses on co-investments in which majority stakes in private companies around the world are acquired together with an established network of leading private equity managers (so-called buyouts). In order to make such long-term investments in the real economy accessible to suitable investors, the European Commission created a regulation called the European long-term investment funds (ELTIF) in 2015 and recently simplified it further.
Contrary to many previous private equity funds, which were mostly closed, this fund is structured as an open-end fund. This means that investors are more flexible in terms of the time of their investment and can redeem invested capital more regularly as with closed-end funds after the second anniversary of the fund’s launch date. Returns and dividends are reinvested by the fund which may result in higher compound interest and higher returns in the long term.
BlackRock has more than two decades of experience in investing in the private equity asset class on behalf of its clients. The co-investment approach enables lower costs relative to similar funds and broad diversification across sectors, investment periods and regions. Fund assets can be invested quickly thanks to broad market access. Co-investments also offer the advantage that several investors thoroughly check and analyse which companies to invest in.
Christian Bimueller, Head of Digital Distribution Continental Europe at BlackRock: “We’re very excited to introduce our new Private Equity solution onto Scalable Capital’s investment platform, allowing wealth investors in Germany digital access to BlackRock’s private markets capabilities for the first time. With private companies increasingly driving economic growth, we are offering a unique opportunity for long-term investors to unlock potential returns blending with traditional public markets. By breaking down barriers to investing in private assets, we are enabling wealth investors to diversify their portfolios and access institutional-quality private market investments in a digital format.”
Simple investment in private equity through seamless integration into the Scalable Broker
Alternative investments will be seamlessly integrated into the Scalable Broker. The access happens conveniently via the app, where manual and postal steps are no longer required. Investors in alternative investments can also expect automatic offsetting of capital gains against loss pots and exemption orders as natural as for all other securities.
Scalable Capital has added numerous functions to its platform specifically for the new asset class: the fully digitalised suitability check, a two-week revocation option for purchase orders and a comprehensive range of information to make an informed assessment of the long-term investment on offer.
New asset class first in the Scalable Broker
Interested parties in Germany can from now on sign up to a waiting list to receive regular updates until the planned start in April. They will also receive information on private markets investments and be the first to find out when the BlackRock Private Equity Fund will be available in the Scalable Broker.
Shares can be redeemed for the first time two years after the fund's launch. After that, a sale is possible in general once a quarter. Due to the long-term nature of the investments, the total of redemptions are limited to 5% of the fund volume. There are no front-end loads nor redemption fees. The management fee for the actively managed fund is 1.95% p.a. If the fund exceeds its minimum return, the fund manager also receives a performance-related profit share.