Market News: German Banks Open Private Equity to Everyday Investors

German banks currently provide retail investors with private equity, providing a new channel to wealth building other than the conventional savings.

German banks, such as Deutsche Bank and Trade Republic, are broadening access to retail investors with their own funds in the sphere of private equity. 

This change is exploiting the huge savings base available in Germany, which has never indulged in this kind of investment.  The intention of the move is to bring household wealth from low-yield savings to high-yield private markets.​

Rethinking Private Equity Access

Recently, Deutsche Bank introduced a joint venture fund with the Partners Group in Switzerland in the private markets.  It provides low entry minimum real estate, infrastructure, private equity, and credit investment to qualified clients. 

The fund operates under an evergreen format where there is flexibility in entering and exiting when market conditions are favorable. It is a change of the closed-ended funds, which are usually restricted to institutions.​

Trade Republic is a fintech platform in partnership with Apollo Global Management and EQT, which enables exposure to private equity with a minimum investment of as little as €1, which minimizes barriers to smaller investors. 

As their co-founder pointed out, high demands among Germans willing to invest in privately owned businesses of their trust, the perception has shifted in the last 20 years.​

The New German Investor Landscape

The German investment culture is historically conservative towards private equity but is changing. 

Industry leaders allow educating investors to make sure that they have a proper grasp of risks and benefits. 

The tendency follows the patterns in the US and UK, where the regulators facilitate access to the retail market in the private market.​

Such democratization may redefine the management of wealth in the largest economy within Europe, whereby there would be options other than the use of bank deposits. 

It also points to increasing use of digital in retail investments as German banks are becoming innovative to cater to evolving tastes.​

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