We talk to a UK-based firm that is part of changes affecting how investors obtain access to areas such as private market investing.
The word “democratisation” seems to be thrown around these days when it comes to the idea of investing into areas such as private equity and hedge funds.
There appears to be a trend of wealth management organisations seeking to widen access to “alternative assets” (a term so broad that there is an urgent need to provide a better one). One such firm is UK-based Goji, founded in 2015 and now working with more than 30 investment managers and serving more than 20,000 investors. It charges a monthly fee for access to its platform and an assets under administration fee for assets held on it; it has serviced more than £800 million ($1.09 billion) of assets, employing 25 people. And this publication recently spoke to David Genn, chief executive.
The [alternatives investing] space continues to have a lot of inefficiency and many processes remain paper-based. There’s a need to continue digitalising it. The inefficiency means that the sector cannot scale up to bring in HNW clients, Genn said.
“We digitalise the entire end-to-end journey,” he said.
The platform provides wealth managers and investors with a digital data room to give them access to the information they need to make an investment. It offers them a fully-digital investment journey covering automated onboarding through to online reporting, he said.
Genn noted that there has been something of a trend in firms seeking to “democratise” access to such assets, with the US arguably in the lead, as per the recent move by the SEC to change rules on Accredited Investors. “The US is ahead of the rest of the world in giving access,” he said.
His US point refers to how the US Securities and Exchange Commission tweaked rules so to widen market access under its Accredited Investor regime. (There is some debate about how much more leeway investors actually get.)
Goji has its specific features, but there are plenty of other organisations saying they’re in the “democratisation” business. For example, New York-based iCapital is one such group. This news service has interviewed the US Registered Investment Advisor, Proteus, about how it aggregates client assets in order to obtain a sufficient mass of money to enter a particular investment.
There is a lot at stake. The volume of private capital runs into billions. To cite private debt, for example, a total of $34 billion of private debt funds were raised among 49 funds in the second quarter of 2020.
Within private equity, $116 billion was raised in 2Q20 (source: Preqin). For the most part, only institutions, including family offices, and ultra-wealthy individuals deemed “accredited,” could participate.