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Wealthsimple is aiming to bring the world of venture capital and growth equity to retail investors.
The financial services company announced on Wednesday that it has partnered with Washington, D.C.-based alternative asset firm Accolade Partners on the new Wealthsimple Venture Fund I.
The fund will focus primarily on technology and healthcare companies. Wealthsimple said contributions allocated to venture capital will invest in firms over their full lifecycle, including from the seed stage, or the stage where the idea for a new business or product idea is still in development.
Money invested in growth equity opportunities will be funneled into software firms that are at or close to becoming profitable and companies that operate in fragmented industries, which are industries that have lots of competition and aren’t dominated by a small number of major players.
The move into venture capital marks the latest expansion for Wealthsimple, which has been growing its financial offerings in recent years. The company launched its stock trading platform in 2019 and added the ability to invest and trade cryptocurrency assets in 2020.
Typically, investing in venture capital has been reserved for wealthy individuals.
“Venture capital — and other private asset markets like private equity, credit, and real estate — have been a core part of successful investors’ portfolios for years, but high account minimums, net worth requirements, and arcane paperwork have made these opportunities out of reach for most investors,” Ben Reeves, chief investment officer at Wealthsimple, said in a release on Wednesday.
By their very nature, venture capital investments also tend to be more risky since they do not have the financial track record that some investors rely on when making investment decisions.
Wealthsimple’s partner Accolade has invested in a number of companies that went on to become some of the most recognizable brands worldwide today, including Airbnb and Instagram. The release claimed Accolade funds have outperformed the broader S&P 500 by between 7.5 per cent and 21 per cent since 2005.
Investors will be required to speak to a registered portfolio manager before putting their money into the fund to assure it aligns with their risk tolerance and suitability. Clients also have to commit to having their money invested in the fund for roughly 10 years, which, as Wealthsimple pointed out, is a similar obligation to most venture capital funds.
The company said there is a waitlist to invest in the fund, which has yet to launch, and that priority would be given to existing clients first.