The spread of web-based platforms has reached into the rarefied atmosphere of private equity, which has historically been paper-based and face-to-face in-person meeting with one’s investment adviser. This is taking place against an industry-wide drive to “democratise” the private assets world, in order to sate huge desire to invest, but also to address the equity issues raised in relation to significant barriers to access.
One such investment platform is Titanbay, which operates an investment platform enabling institutional and private investors to invest in private equity, venture capital or real estate funds.
“The technology that we’ve developed, it’s all based on automating the existing infrastructure and architecture,” said Adam Harrison, Titanbay’s chief commercial officer and a member of its founding team. “That’s fundamentally what we’re deploying into wealth managers today to enable them to bring a proposition to their client base at scale.”
Harrison, discussing the democratisation issue, emphasised that his firm did not see itself as disrupting the status quo. “What we’re providing is a solution for an audience that historically has been very underserved if not totally underserved,” he said.
Noble goal
“Democratisation of private markets is a really noble goal,” said Harrison. “We will get there but we’re not there yet.” He listed product development, regulation and technology as being areas “where significant work needs to happen.”
Digital platforms are part of a wave of efficiency-related developments, explained Longrus, speaking at this week’s Private Assets Conference held by Alfi, the Association of the Luxembourg Fund Industry. “A lot of those immediate needs are driving efficiency, which just so happens to coincide with what the industry should be doing to prepare for the trend of democratisation in private equity.”
The utility of platforms in one area is well-established: Anti-Money Laundering and Know-Your-Customer services. “AML KYC is already available an integrated experience for your end user to log into a portal, look at diligence material, click a button, subscribe electronically, click another button activated into the data room as an investor and have all the information for the subscription documents be carried over in a seamless integration, all of that technology is already available,” explained Maryam Longrus, director of product management at FIS Global, a financial services technology provider which has clients looking at digital assets and trading platforms, as well as a number of clients working in a private capital space.
Just scratching the surface
Longrus explained that the underlying technology of investment platforms is “an evolution of web 3.0”. “I think that we’re just scratching the surface on what the capabilities of that are.”
Another technological element in this area is tokenisation, which leverages blockchain technology to hold virtual representations sensitive within a highly secure digital environment and offers the promise of lower costs.
Harrison of Titanbay said “we’re nearing the beginning of the journey with tokenisation,” he said. “It will have a profound impact on the efficiency of everything in the value chain.” However, he pointed out, while he’s hearing from clients or wealth managers asking about how his firm is preparing for tokenisation, “in terms of demand today, we don’t see it at all.”
Longrus explained that her firm had heard from family offices who tell them they want access to the asset class. “I think there’s certainly a need there. And that’s really exposed tokenisation as a way to achieve that democratisation that we’re seeing as a trend.”
Facilitating change
Nasir Zubairi of the Luxembourg House of Financial Technology expressed his view that he is tech agnostic. “Personally I don’t care what the tech is underneath, as long as they’re a trusted vendor, has the right protocols” and are able to provide integrity while being robust. Zubairi has long taken the view that “you don’t need blockchain to do what a lot of people claim tokenisation will do.” However, he conceded that “it’s given that sector a momentum to facilitate change and the sector does need change.”
“I think that technology can be used to solve so many of the sticking points or the hurdles or capitalise on the opportunities that the industry faces,” said David Genn, the CEO of Goji Investments, a London-based investment platform provider which provides infrastructure enabling investors to move to digital investing. “You need to choose the right tool for the job,” he explained. “You can use existing technology to target and digitise that effectively.”