When retail investors ride into the private equity universe

For the investing public, it would seem that a vehicle like a SPAC is a ticket to ride with the big boys of private equity. And indeed, the opportunity to jump on board what has been called the "poor man's private equity" has proved hard to resist. Special purpose acquisition companies (SPACs) have seen raging popularity in the past year, with record volume of issuances and prominent mergers taking place in the United States. The structure gives average investors a channel to invest alongside established sponsors in novel opportunities that can potentially provide outsized returns. Other products allowing some exposure to private markets have already been available in Singapore. And it's not hard to see why retail investors might seek out non-traditional vehicles for better returns.

Private equity (PE) has generally outperformed public markets over the long term. Over a 25-year period, a Cambridge Associates index tracking PE funds saw 13.2 per cent annual returns, higher than the modified public market equivalent annual returns from the S&P 500 and MSCI World indices of 8.7 and 6.6 per cent respectively.

But PE is usually accessible only to institutions and high net worth clients who can afford high investment minimums and long periods of illiquidity. The lock-in period is typically around 10 years, and can stretch as long as 15 years.