As an asset class premised around long-term investments into tangible assets and well aligned investor and manager interests, investing into the private markets is far removed from gambling, a zero-sum game where ultimately the house always wins. Yet the question raised around social responsibility with regards to individuals putting meaningful amounts of their personal capital at risk in some way, is of relevance. Notably, many of the sums referenced in this case are on a par with the minimum commitment sizes associated with the retail-oriented private markets products coming to market as fund managers endeavour to reach a wider pool of investors.
Retail capital goes hand in hand with heightened regulatory scrutiny and specifically the caveat that these types of investors require more protection. This highlights the important role the private markets onboarding process must play in bringing ever increasing numbers of investors at the retail end of the spectrum into the asset class in a considered and responsible manner. Accreditation and fund subscription provide much needed assurance that investors understand the investment proposition, for instance associated fees and restrictions around redemptions, and that they can afford to make the investment.
Currently, the outdated and repetitive nature of the investor onboarding process detracts from its purpose by making it excessively complex and frustrating for investors. It also significantly drives up the friction and overheads associated with raising capital for fund managers. As the private markets become more financially inclusive, addressing this inefficiency with a solution that meets the needs of fund managers and investors from an onboarding perspective is going to be critical.
Specifically, there’s a need to align the needs of fund managers for a robust and scalable KYC process with the needs of investors for a simpler and more accessible onboarding experience which helps them to make considered investment decisions, without the distraction of a lot of paperwork.
