Institutional investors have allocated to private equity for years, but getting access to these specialized opportunities can be a difficult and burdensome process for advisory professionals, family offices and high-net-worth investors. All that may be changing with the arrival of iCapital Network, a platform that streamlines access to high-quality private equity managers through a state-of-the art, secure, online portal.
I recently sat down with my longtime collaborator and co-founder of Private Wealth magazine, Hannah Shaw Grove, who just joined iCapital Network as senior vice president and chief marketing officer, to learn about the company and its plans to broaden access to the world of private equity.
Prince: Can you provide an overview of iCapital Network?
Grove: In its simplest form, iCapital is an online marketplace for private equity. Historically, there’s been very little visibility into the private capital market for wealthy investors and their advisors. Information about managers and their funds was only provided to qualified purchasers—individuals with $5 million in investable assets, excluding the value of their home—and even then, often only through a referral or an introduction. If you were granted access, the information you got depended largely on what the fund manager was willing to provide and there was no context for evaluating what you were buying.
iCapital is a platform that tracks every open fund—right now there are more than 2,000—in a consistent framework. It allows investors to compare offerings on an apples-to-apples basis, so to speak. The platform has a very intuitive, user-friendly interface that makes it easy to sort through the universe using specific criteria like AUM, quartile ranking and cumulative IRR and drill down into a range of asset classes, geographies and strategies depending on your investment goals and risk parameters.
Essentially, it’s providing the tools that allow advisors and family offices to conduct institutional-quality due diligence on private equity investments for their wealthy clients.
Prince: What about access to the funds themselves? Getting an allocation with a manager in high demand can be nearly impossible and might require a commitment of at least $5 million and, in some cases, a lot more.
Grove: That’s right, private equity managers are used to dealing with institutional investors who can commit tens of millions of dollars to funds. They don’t always have the bandwidth or the infrastructure to work with smaller relationships that have different servicing needs. By creating a centralized destination for private equity, we can help those same advisors and family offices get allocations into better funds, while providing the private equity managers with a scalable way to access the significant capital that is outside traditional institutional channels.
One of our key financial backers is Credit Suisse’s Private Fund Group and we’re partnering with prominent fund-raising firms like Blackstone’s Park Hill Group and Eaton Partners and a group of seven or eight others that will continue to expand. Collectively, those organizations diligence close to 1,000 private equity funds a year, or about half the market. Our in-house origination team identifies a sub-segment of those to make available as private access funds to advisors, family offices and qualified purchasers on extremely preferential terms—low fees, low minimum investments—in some cases as low as $100,000—and no commissions.
Prince: What’s the appetite for private equity among high-net-worth investors?
Grove: Overall, it’s pretty strong and that has a lot to do with performance results. There’s a lot of widely available data that shows private equity has outperformed other investments and asset classes by upwards of 10% annually over the long term, making it hard to ignore for certain types of investors. And 2014 was a particularly strong year for exits and fund-raising, which has helped fuel some additional interest.
In my experience, there are pockets of pent-up demand, especially among people who are already familiar with private equity. Tiger 21 recently announced that its membership has an average allocation of 19% to private equity across closely held stock, direct investments and funds, and cited it as the most popular asset class at the end of 2014. These types of investors, obviously, want to see more deals and have better access. On the other hand, there are a number of wealthy individuals who have not ever invested in private equity for one reason or another—the timing wasn’t right, the minimums were too high to allow for sufficient diversification, they were focused on other types of investments, what have you—but are intrigued about private equity and who represent the biggest market of potential investors. iCapital Network can be especially useful to those individuals and their advisors as a way to explore the asset class with turnkey support.
The Gatekeepers
March 10, 2015
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