Can technology address private markets’ deal distribution challenges?

Effective private markets deal distribution to potential investors offers huge benefits for financial institutions should they get it right, but also poses a number of challenges that they can easily get wrong.

For example, how do you target the right types of deals to the right types of investors? How do you ensure that they’re only able to access investment opportunities that are appropriate for their regulatory profile? And how do you know which regulatory jurisdiction investors fall under if they work or live in multiple parts of the world?

When coupled with the fact that many firms still rely on disparate systems from which they collate investor data and share deal information, it’s unsurprising that the distribution of new investment opportunities is often a disconnected, manual process that fails to successfully engage clients and can create significant regulatory black holes.

Curating deal flow in a digital marketplace

An increasing number of institutions are turning to digital marketplaces to curate and control the private market deals that their clients can access.

Digitising the presentation of investment opportunities and creating a centralised hub for their private markets proposition is central to their strategy of generating better investor engagement, improving operational efficiency and reducing regulatory risk.

This approach also presents a far better investor experience for your clients. Not only is deal information presented more consistently, but it offers investors the ability to access information at their convenience rather than needing to schedule calls or meetings with their relationship manager.

How can technology help private markets deal distribution?

For firms that are digitising their private markets proposition, the ease of sharing and managing a deal through technology has the potential to be a game changer for how they connect their clients with investment opportunities.

Historically, institutions have shared investment opportunities with their clients during face-to-face meetings. However, as demand for private markets increases, firms are faced with the challenge of distributing more deal flow to more investors. Doing this face-to-face obviously either requires a large team of people or limits the scalability of the proposition. However, the use of technology to share information ‘on demand’ actually reduces the need for human intervention while democratising access to a larger pool of investors.

From a regulatory perspective, the ability to embed compliance checks into pre-approved workflows means that there is far less reliance on team members to coordinate these processes manually. In turn, this means that there is limited opportunity for governance processes to be intentionally or unintentionally bypassed, offering firms greater peace of mind and freeing up more of staff’s time which can be spent on fee-earning activities.

A digital platform, such as Delio’s private markets technology, can be used to implement a pre-agreed internal framework across the entire investment lifecycle. This can be configured to the specific requirements of the institution and include approval processes at each stage, enabling firms to promote investment opportunities to clients in a compliant and automated manner.

Some of the other benefits of using private markets technology includes:

Record activity and document access

As a central hub for private markets activity, you can store, manage and share vital documentation. This means all documents can be kept up-to-date in a central location that acts as a single source of the truth.

Access to these documents can also be locked for certain users, meaning they can only view them when it is appropriate for them to do so and certain requirements have been met; for example, if an NDA needs to be signed first.

Built in compliance checks

When you set up the framework of your investment lifecycle, compliance checks can be embedded as part of the core workflow. Something as simple as building in a digital sign-off at certain stages of a deal can ensure that all necessary regulatory protocols are executed accurately and the investment process can only progress once completed.

Managing investor appropriateness

Making sure a deal is appropriate for each investor is a highly complex area that is subject to stringent regulation, especially with many regulators increasing their focus on protecting consumers.

Within the Delio platform, integrated investor profiling tools and distribution lists enable firms to share deals with investors based on specific criteria, including their investment history, risk appetite, and regulatory classification. This results in deal distribution being far more robustly controlled and governed.

Save time and money

Ultimately, one of the key benefits of digitisation is the automation of repetitive, administrative aspects of the investment cycle. In the past, many firms have relied on well paid staff to undertake these simple but essential tasks, representing a significant operational inefficiency. By reducing the reliance on people to do this work, firms are able to lower their overheads, scale their operation, and redeploy team members to fee-earning activity that adds value for clients.

What are the benefits for investors?

In an increasingly digital world, investors now expect smooth, tech-based interactions with financial service providers. In almost every other aspect of their life, they are presented with a digital interaction, and investing in private markets should be no different.

Instead of having to wait weeks to schedule a call with their relationship manager, they can login to a digital platform at their convenience, browse deals when they have the time to engage fully, and register interest in opportunities there and then. At the same time, information is presented in a clear and digestible way through video and online content, rather than through folders of paper or, at best, PDFs and spreadsheets.

This highly targeted and streamlined experience means that investors can access the information that interests them the most quickly and efficiently. As a result, they’re much more likely to engage with the deals on offer.

Digital deal distribution is no longer a ‘nice to have’

With technology providing a robust and cost-effective solution to firms’ deal distribution headaches, and the demand for private markets continuing to grow in the face of economic instability, now is the time to digitise.

In an increasingly competitive landscape, ensuring that a firm’s client offering is simple to interact with is vital. When coupled with technology’s ability to power sustainable growth, improve efficiency, lower costs, and drive value, it’s clear to see why firms are digitising their private markets propositions.