Friday, April 8, 2022

Retail Investors Have Access to VC Funds in Canada

Canadian retail investors have access to venture capital funds through WealthSimple.   WealthSimple Venture Fund I is a venture capital and growth equity fund.  

WealthSimple partnered with Accolade Partners and will invest in VC offerings from Accel, Andreessen Horowitz and Kleiner Perkins.  Investors can put up as little as $5,000 but will have to hold the investment for the life of the fund (10 years estimated). WealthSimple's timing is interesting as financial markets are straining under rising interest rates. 

 WealthSimple investors will pay two middlemen in addition to the venture capital firm.

Investors will pay a management fee of between 0.4 per cent to 0.5 per cent, plus the cost of the underlying security.

For the VC fund, those underlying costs include three layers of fees: a fund administration fee covering costs of about 0.2 per cent; incentive fees paid to Accolade of about 10 per cent; and fees paid to the underlying fund managers – the VC and private equity firms – which could include up to a 2-per-cent management fee and 20-per-cent incentive fee. Like most VC funds, incentive fees are only paid if returns exceed a certain threshold, and the fee only applies to returns, not the total investment amount.

 Investors will be robo-advised.

Clients will be able to invest in the fund through the company’s robo-adviser platform, Wealthsimple Invest.

High fees and a robo-advisor, who wants in?  Their website states it can make someone into a financial genius in less than 45 minutes.  Pardon my skepticism WealthSimpleton.