With the rise of syndicate investing platforms, retail investors now have more opportunities to access private investment deals that were previously only available to institutions and ultra high net worth individuals. Syndicate investing allows groups of investors to pool funds together to invest in private companies, real estate, etc. By aggregating capital from many small investors, syndicates can participate in deals with high minimums. For retail investors, joining an investing syndicate is an efficient way to add private investments to their portfolio for diversification and higher return potential. Moreover, investors can benefit from the due diligence and expertise of the syndicate sponsors.
Syndicate investing opens up access to investments like venture capital deals
Historically, top-tier VC deals were only available to institutional investors like pension funds, endowments, and family offices. Through investing syndicates like AngelList and SyndicateRoom, accredited retail investors can now buy into these private tech startup deals with much lower minimums, often as low as $1,000. By pooling together thousands of investors, a syndicate can amass millions to invest into a hot startup alongside VC firms. This gives retail investors rare exposure to potentially high-growth but risky venture deals.
Real estate syndicates allow investing in commercial properties and development projects
Commercial real estate has been an asset class long dominated by large real estate firms and REITs. Real estate syndicates enable individual investors to buy into apartment buildings, office spaces, retail complexes, and other properties. The barrier to entry is lowered significantly, with minimums ranging from $25,000 to $50,000 versus the millions required to buy commercially. Investors can gain exposure to stable rental income, appreciation potential, and tax benefits. Many real estate syndicates also focus on ground-up development deals, which offer higher returns for higher risk.
Syndicates help diversify portfolios beyond public stocks and bonds
For retail investors, syndicate investing can supplement a portfolio concentrated in traditional public market assets like stocks and bonds. Venture capital and real estate deals add diversification into private, alternative asset classes that have a low correlation to public markets. This can potentially enhance returns while lowering volatility. Syndicates also provide access to esoteric assets like litigation financing, farmland, royalties, etc. that are difficult to access otherwise. A prudent allocation to syndicate deals can bring desirable diversification.
Expertise of sponsor is key – retail investors can leverage experienced lead investors
The background of the sponsor leading the syndicate is crucial. For venture deals, often sponsors are seasoned angel investors or founders themselves. For real estate, sponsors tend to be real estate professionals or developers. Retail investors should assess the experience and track record of sponsors in conducting proper due diligence. Leveraging the expertise of the lead investor in sourcing, evaluating, and managing deals is a key benefit of syndicate investing.
For suitable accredited investors, participating in investing syndicates can provide efficient access to deals in private markets that would otherwise be difficult to access directly. The pooling structure reduces minimums significantly. Retail investors should carefully assess sponsors, understand risks, and apply proper portfolio allocation.