LGT Crestone is partnering with StepStone Private Wealth to offer one of the first open-ended venture capital (VC) funds of its kind, allowing Australian high-net-worth investors (HNWI) to invest in a global, highly diversified portfolio of unlisted, high-growth companies.
The StepStone Private Venture and Growth Fund (SPRING or the Fund), which is being offered in multiple jurisdictions, will invest globally in private companies focused on the ‘innovation economy,’ and those companies that are benefiting from long-term secular trends, often technology themed.
“We’ve always had a clear vision: to bring world-class investment opportunities to Australian HNWI. This latest global VC opportunity is a testament to realising this vision,” said Michael Chisholm, CEO at LGT Crestone.
StepStone Group (Nasdaq: STEP) is one of the largest private market investment managers in the world. Last year, it allocated more than US$75 billion across private equity, infrastructure, private debt and real estate. Growing its reach even further, in 2021, StepStone acquired Greenspring Associates, one of the world’s largest allocators within the VC ecosystem. Importantly, StepStone’s venture platform today comprises one of the largest asset teams dedicated to the VC and Growth asset class, with over US$31 billion in assets under management as of March 31, 2022 and some 240-plus manager relationships.
“SPRING is the one of the first funds specifically designed for private clients and smaller institutions that offers a truly diversified exposure to the leading fund managers and portfolio companies within the VC and growth equity landscape,” said Martin Randall, Head of Alternatives at LGT Crestone.
VC and growth equity are positioned to play an even more important role in portfolios as value creation attributed to the public markets in the past, shifts to the private markets, according to Randall.
“Companies are staying private for longer, often making a choice not to list. Many of these companies are creating value at a much more rapid rate than public companies, which are diminishing significantly in number in the US,” he said.
“In 1996 for example, there were some 7,300 listed companies in the US. By 2016, that number had dropped to just 3,600, which combined with greater (public) information efficiencies today, makes it harder for fund managers to extract alpha from publicly traded shares”.
Investors can benefit from potentially greater wealth generation through investment in private companies, and in particular, venture capital which has generally delivered stronger returns on an upper quartile basis over the long term versus private equity buyouts.
“The big caveat here is that you need to partner with the right groups; you don’t want to simply own the index in venture,” he said.
StepStone’s VC and growth equity funds (including those previously managed by Greenspring) have consistently produced top-performing returns when compared with direct VC fund benchmarks, and SPRING will seek to produce these returns on an ongoing basis for private clients through exposure to some of the best venture capital and growth equity managers.
Ashton Newhall, Partner at StepStone, said “In venture and growth, the disparity between the best and the worst managers is more pronounced than most other asset classes. Investing in the average manager is typically not a good outcome. However, if you look at the top-performing managers, we believe there is a much higher degree of repeatability of performance, and investors have achieved exceptional returns where they have been able to access and invest with those groups”.
SPRING has been designed to provide investors with access to those leading manager relationships formed by StepStone over decades.
In what is one of its more unique features, SPRING will also aim to provide structured liquidity of up to 2.5% of the Fund’s assets quarterly, combined with monthly subscriptions.
“The recent evolution of so-called semi-liquid solutions are far more aligned to the way private clients allocate and manage their portfolios, as compared to the traditional closed-end funds, which are predominantly designed for institutions. Appropriate advice remains mission critical however as ‘semi-liquid’ does not mean guaranteed liquidity, which can often be the interpretation,” said Randall.
LGT Crestone will be taking a global cornerstone position in SPRING and as such, SPRING will be exclusively available to LGT Crestone clients in Australia until the end of this financial year.
“We see LGT Crestone as a leader in helping to make private markets more accessible to HNWI. We are thrilled to expand our partnership with the Firm to offer this highly differentiated strategy to its clients,” Newhall said.
“We expect strong demand from our clients who are already well diversified across alternatives with an average portfolio allocation of 19%. 2022 has proved to be a successful test case for our alternatives (asset) program, which has played a strong role in offsetting significant market volatility across both public equities and fixed income this year,” said Randall.
