Looking to simplify the process for people to invest in the private markets, alternative asset manager Hamilton Lane announced that it will be investing in and incorporating the technology produced by IDR, a fintech firm based in Guernsey in the Channel Islands. The tech allows investors to invest in multiple funds from different platforms through one centralized hub.
Private market funds have been gaining popularity among advisors as they continue to outperform the public markets. With advisors seeking to gain entry, Conshohocken, Pa.-based Hamilton Lane focuses on tools and other resources to make that process simpler.
The firm has invested in numerous firms that can provide those resources, and IDR is its latest tech investment. IDR uses a passport system that investors can use to receive preapproval for investing in the private markets, according to Tim Andrews, founder and CEO of IDR.
Hamilton Lane has not disclosed the amount of its investment in IDR but says the tech firm will maintain its independence.
IDR’s passport system allows investors to put money in different funds from a variety of fund managers, according to Andrews. He described it as one key to invest across the private markets.
“Each investor in the private markets exists only once and that is true whether you are an institutional investor, or you are an individual investor,” he said. “We allow each investor to have a single passport that preapproves them to onboard onto all the funds that are on our platform.”
IDR services more than 40,000 investors and 5,600 funds across 300 fund managers. There are three categories of questions that investors complete to establish the IDR passport. The first involves general security questions, such as whether a person has enough to invest and understands investing risks.
The second pertains to “knowing your customer rules,” in other words, making sure that a person is not laundering money. The final category has to do with tax questions such as having the investor understand that revenue from an investment would be treated as income for tax purposes in their home country.
Once the individual fills out the information, the IDR team approves the profile at various security levels depending on the home country of the fund the investor chooses to invest in. The investor then has a passport to invest and will not have to go through the process again, according to Andrews.
“What we avoid is the investor having to provide the same information again and again and again every time that they invest,” Andrews said. “Once the investor has been approved on IDR … when they go to invest in the next fund, then they are preapproved.”
Meanwhile fund managers can use the technology to help control the process of getting clients into private funds and preapproving them for investments across all the fund manager’s investment strategies and jurisdictions. It means managers will not have to take additional time going through the time-consuming approval process. They can dedicate that time more to fundraising, according to Andrews.
Hamilton Lane will incorporate IDR’s technology into its private market specialist’s fund subscription, according to Erik Hirsch, vice chairman and head of strategic initiatives at Hamilton Lane. Its funds have been available on IDR’s platform since 2022.
“We've implemented IDR onboarding services throughout our portfolio of fund offerings to help maintain consistent oversight and streamline our [know-your-customer] and [anti-money laundering] processes,” Hirsch said. “This has led to continued operational efficiencies as well as cost, time and resource savings.”
There will be an additional charge for the use of the technology, the amount of which will depend upon the level of services a client selects, Andrews explained. Traditionally, a fund manager will be charged annually per investor profile. The firm did not disclose the specific charge.
IDR will use Hamilton Lane’s investment to help expand its operations and services teams as well as grow its marketing group, according to Andrews. It will also use the investment to roll out new services in the coming months, but he declined to specify what those enhancements will include.
In the meantime, Hamilton Lane and IDR are optimistic that both of their client bases will benefit from the partnership, as will the firms themselves.
“Hamilton Lane will benefit by utilizing the IDR platform and expanding our portfolio of cutting-edge private markets technology investments,” Hirsch said. “In turn, IDR will be able to extend its services, evolve the feel and functionality of its technology and expand its global team. … Ultimately, though, this is a win for private markets investors, who will have access to an even better digital investor onboarding solution.”