How is digital transformation shaping private markets? 

We’re seeing a wave of technology and software innovation occurring across the private markets spectrum to serve all stakeholders – LPs, GPs, and SPs. The digital tools and platforms that have emerged over the past 10 years have laid the foundation for a seismic shift in the industry to make room for more participants, more products, and more liquidity. This has created a flywheel to allow for superior management of private market investments throughout the investment lifecycle.

We believe we’ve seen three distinct phases of change take place:

1. The democratization and mainstreaming of private markets. This was focused on the expansion of opportunities for institutional GPs to access retail LPs, and vice versa. We believe this phase occurred between 2010 and 2020.
2. The building of new critical operating infrastructure within private markets. This phase, which we see ourselves in now, focuses on enhanced “pipes and rails” for the entire industry, and across institutional and retail participants. As this enterprise technology continues to evolve, we predict it to mature into 2025.
3. The rise of private market lifecycle platforms. We believe this phase will provide the most fascinating outcome of the digital transformation movement in private markets: a transformation that will allow for better management and transparency around the lifecycle of the investment, harnessing data, portfolio performance, and rebalancing needs in a single unified platform.

Let’s start at the beginning of the alternative investment lifecycle, with investor onboarding.
What are the biggest pain points?

Investor relations (IR) professionals bear the brunt of the current lack of digitization. They work hard to engage prospective investors, grind through long due-diligence processes, and later maintain these relationships across subsequent commitments. Without a simple solution to enable digital onboarding and the fulfilment of subscription documents on an open-architecture, electronic basis, IR professionals are at risk of creating a friction-filled experience for the LP. In many cases, this hurts the relationship, as onboarding, document signatures, and anti-money laundering (AML) reviews can get messy.

Previous attempts to digitize the onboarding and subscription document process left a lot to be desired. Many solutions failed to see more than a 5% adoption rate. Often, these shortcomings were due to clunky user interfaces with confusing steps and workflows. Additionally, they tended to be very GP- or SP-centric when thinking about the problem. As a result, they lack the portability and scalability an LP would want if they wished to reuse their investor data or leverage a single transaction system for any private market fund investment within the industry in the future.

What can be done to improve efficiency when it comes to data sharing
across multiple service providers and software applications?

I read a quote recently that the scarcest commodity on the planet isn’t oil or lithium or cobalt, it’s software programmers, of which there are only 29 million. This is concerning, as we believe hundreds of software systems must inter-operate for the private markets life-cycle platform to exist. And this requires a lot of creative software development and open-APIs (application programming interfaces) from all and for all. If everyone embraced an open-API culture, the private markets industry would innovate faster, and the resulting data sharing would benefit not only the LPs, but all stakeholders.

How is digital transformation improving investor onboarding
and subscription document processes?

We wanted to empower the LP while at the same time offering a powerful digital solution to the GP and SP. Thus, we delivered an automated private market fund transaction system that makes the paper-based investor onboarding and subscription document process electronic, reusable, and scalable.Our +SUBSCRIBE LP Passport is equipped with the data required to purchase any fund, in any global jurisdiction, at any time ─ and do it minutes. It’s reusable on any fund investment and is deployed at the click of a button by either the LP, GP, or SP, regardless if either of the other two counterparties is on the system already. This prevents the LP being forced to use closed systems selected by the GP or SP, which, as with investor portals, can be time-consuming, and empowers all stakeholders with a single open system on which to collaborate.

Further, we recently introduced compliance with built-in AML/Know Your Customer (KYC) features for our Passport. Together with the errors the platform already reduces, we’re seeing a meaningful reduction of “not-in-good-order” (NIGO) submissions, which can lead to high legal fees and wasted time, placing a strain on relationships. As a result, our system can reduce the friction for many other professionals involved in the workflow, not just LPs and IR professionals.

Across the investment lifecycle, how will digitization make
collaboration easier in the future?

If we, as an industry, can achieve our own “escape event” by successfully deploying inter-operating systems, then opportunities to collaborate across platforms with all stakeholders are endless. Being able to source, perform due diligence, transact, and report on investments in a single venue with better data and transparency is the holy grail.

Further, innovations we’re building today in the at-trade moment will enable the lifecycle platform with bulk transactions, rebalancing, and secondary exchange liquidity for private market portfolio investments. Multi-sided platforms such as +SUBSCRIBE, which continue to expand services for all participants of the venue, foster greater communication capacity and drive collaboration within the private markets. It’s a fantastic time to build in this industry and watch it digitally transform.

About Rafay Farooqui and +SUBSCRIBE
Rafay is the Founder and CEO of +SUBSCRIBE, a leading enterprise software company that is powering alternative investments for institutional allocators, sponsors, and service providers. Prior to +SUBSCRIBE, in 2009 Rafay co-founded CAIS, a fintech company offering a menu of curated alternative investment funds to wealth management firms.

About PREQIN
Preqin, the Home of Alternatives™, empowers financial professionals who invest in or allocate to alternatives with essential data and insight to make confident decisions. It supports them throughout the entire investment lifecycle with critical information and leading analytics solutions. The company has pioneered rigorous methods of collecting private data for almost 20 years, enabling more than 200,000 professionals globally to streamline how they raise capital, source deals and investments, understand performance, and stay informed. For more information visit www.preqin.com.