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Private banks are courting the wealthy with deals open only to a select few. The only problem is that few wealth managers are equipped with the necessary expertise.

Bank am Bellevue CEO André Rueegg had a sobering realization after the bank closed its brokerage and corporate finance activities last year in favor of wealth management: private banks don't win new clients with a standardized offering.

Swiss-based Rueegg is going a less conventional route: club deals for private clients. The transactions are hand-picked by private bankers for a small circle of wealthy clients. Investments in start-ups, infrastructure, or real estate have proven especially popular.

Double-Digit Returns

The entirely private nature of club deals in wealth management is what sets them apart from better-known private equity or other private market transactions: clients aren't buying a financial product from a private bank. Instead, they are co-founding a club, usually a vehicle, in which a particular asset will be managed.

Typically after several years, the assets are sold, the club structure dissolved, and clients hope for a double-digit return. As the hunt for yield in a low to negative interest rate environment accentuates, wealthy investors are hungry for any type of deal which promises them more.

A Secretive World

At least some of the appeal of these deals is that they are even more secretive than the already opaque world of private equity. Few private banks even publicly disclose that they offer club deals. Sallfort Private Bank launched a line and carved out the business following its recent merger with Banque Heritage.

EFG International also offers what it calls investment clubs, and Rothschild & Co lures clients with a co-investment opportunity which it pitches to clients as managing money alongside the eponymous French-British banking family which traces its wealthy roots back to the 18th century.

Even wealth giants UBS and Credit Suisse are active in the market for private deals, but clients don't become members of a small club: instead, they typically invest in a vehicle or a fund managed by the bank.

Flexibility a Necessity

In a true club deal, banks don't charge their clients fees; the provider is party to the deal as a co-investor. Italy's Mediobanca, which has offered its clients club deals since last year, typically takes a 20 percent share of the deals it takes.