In a recent discussion with a leading European Fund manager, they described their onboarding process as being at the ‘extreme end of painful’.  And this is not a unique case. 

Over the past decade, private markets investor onboarding processes have lagged behind the evolution of the industry and are now a major source of inefficiency and frustration for both fund managers and investors.  With the significant growth of the industry, an increasingly demanding investor population, and more challenging economic conditions predicted for 2023 there’s a need to play catch-up on this front like never before.  

We’re seeing an increased appetite for technology-enabled solutions that actively support investors through the entire onboarding lifecycle. Over the last 12 months we’ve welcomed a rapidly growing number of fund managers onto our global hub. All of these firms are looking for the same thing: a faster, more accessible and digitally led solution to improve their onboarding process. Simply put, there’s a requirement and a desire for a new industry standard.  

A changing market requires a different approach to onboarding.

Over the last decade, the private markets have evolved into a sophisticated, out-performing asset class which has become increasingly attractive and accessible to non-institutional investors. Preqin predicts a further doubling in size to $18.3tr by 2027 driven in part by retail investors entering the space. 

This new landscape presents real challenges in terms of scale – specifically bottlenecks at the onboarding stage as inefficient processes buckle under the pressure of more investors.  

There’s also a wide gap in terms of expectations as investors, particularly those new to the space, ask why the private markets onboarding experience is so much less efficient and more repetitive than other asset classes.  

Why has it been left behind?

In a world where we conduct pretty much all our financial affairs at the click-of-a-button, private markets investor onboarding remains something of an outlier.  But why is this the case? 

The type of CDD required for the private markets is far more complex from that which retail investors experience in general investment accounts, and that is, perhaps, why the tech has trailed here.  It’s hard, and arguably not desirable, to remove the human element when independent certifications and a range of personal data are required.   

IDR’s approach is informed by our people’s own experiences.  Having interacted with investors in this traditional, non-scalable way, our team of industry insiders understood what the private markets needed. We developed a fintech led solution, bringing together people and technology which increases efficiency and delivers a better onboarding experience for fund managers and investors alike.  

The solution – one-and-done onboarding

Technology and digitisation can speed things up; but for an investor simply to be authenticated once, across all their investments in any jurisdiction is a game changer. And it’s what we set out to achieve at IDR: a simple and universally accepted solution to a recurring, industry-wide problem.  

And it’s one that’s proving attractive to transform how GPs onboard their investors. Approximately half of all private markets investors now hold a tokenized investment passport with IDR which they can share instantly with fund managers around the globe, demonstrating how interlinked the industry has already become. By connecting fund managers and investors through a central hub, it makes the process quicker and more secure for everyone.