Bank of Montreal’s BMO-T asset management arm is launching a new fund with Toronto-based tech financier Georgian Partners that aims to give a broader array of investors a gateway to invest in privately held technology companies.
The new BMO-branded fund will allow accredited investors – often those with high incomes or more than $1-million of available assets – to invest in Georgian’s portfolio of more-established North American tech companies. Georgian typically backs fast-growing, private software companies that have matured past the startup stage, in sectors such as cybersecurity and industrial automation.
The new fund is part of a push by BMO to build up its offerings in alternative investments – an increasingly popular array of assets such as infrastructure, real estate and private lending that are distinct from public stocks and bonds. It is BMO’s first such partnership with a private-market investor on a product that can be sold to investors through BMO’s network of advisers, as well as third-party investment dealers.
It is also a signal that BMO is joining a race to open up private assets that were once the exclusive domain of institutional and ultra-high-net-worth investors to more conventionally wealthy people. Asset managers such as Mackenzie Investments, Brookfield Corp. through its Brookfield Oaktree Wealth Solutions group, New York-based Blue Owl Capital with a recently opened Toronto office, and online investment manager Wealthsimple all offer access to private funds that cater to qualifying Canadian retail investors.
Jeffrey Shell, who is head of alternatives, ESG and innovation at BMO Global Asset Management, likened the new BMO-Georgian fund to “a ladder into the walled garden of private markets,” with similar fees to those charged to institutional clients. And he said that as market volatility has made fundraising more difficult for many institutional investors, there is an appetite to tap a broader base of investors.
“Our alternatives strategy is to try to make a big part of the economy that isn’t investable to non-professional investors, investable,” Mr. Shell said in an interview. “This is our first partnership of many that we are going to be bringing forward over the coming quarters and years.”
It has been a difficult year for technology investors. Valuations of many private and public technology companies crashed as investors fled riskier assets in an era of rising inflation, interest rates and economic uncertainty. The sell-off has spared almost no investors across the technology landscape.
The BMO Georgian Alignment II Access Fund, LP, however, will have exposure to some of Georgian’s most successful portfolio investments that it has backed for years. Georgian has raised additional funds for follow-on investments in a select group of companies, allowing it to double down on the next stage of their growth.
BMO chose to tie its fund to Georgian’s more-mature investments through the alignment fund because it targets companies that are expected to be less risky and could provide returns to investors more quickly. That is in contrast to some of the earlier-stage tech companies that chase rapid growth over profits and attract money from major investors seeking outsized returns.
“They are established, they’re not bets,” Mr. Shell said. “These are companies that do useful things, that have their business models proven, that are growing, that are understandable.”
A Georgian spokesperson declined to comment.
With reports from Sean Silcoff
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