Private markets being transformed through innovative investment vehicles
Insights

Private markets being transformed through innovative investment vehicles

28th November 2023
  • Private markets are moving from an exclusive niche to a more widely attainable investment product, creating both opportunities and challenges for financial institutions. In response, financial institutions are turning to technology and investment vehicles to get ahead.
  • Investment vehicles can offer a solution to the operational and commercial challenges associated with working in alternative assets.
  • With some vehicles facilitating individual investments as small as £5,000, firms can target certain types of investors who would have previously had no realistic access to these types of assets, without compromising on their regulatory commitments.
  • Although traditionally managed in-house, these vehicles are becoming increasingly accessible through external service providers, and when combined with technology, provide a robust solution.

Delio, the provider of configurable technology and deal structuring solutions has released a report exploring how investment vehicles are driving innovation and democratisation in private markets.

Delio’s research has found that changing market dynamics and increased demand from clients wishing to access private market opportunities have meant that financial institutions have had little choice but to adapt their propositions. Offering access to alternative assets is now essential for financial institutions wanting to stay ahead of the curve.

Gareth Lewis, Delio’s Chief Executive comments:

“While multiple approaches may be taken to do this, the ultimate focus lies in creating opportunities in unlisted assets that do not require investors to deploy hundreds of thousands to benefit from the types of returns that make them so attractive. It is about opening private markets to a new wave of modern investors who understand the unique intricacies of alternative assets, the risks associated with them, and the potential for long-term returns if utilised correctly as part of a diversified portfolio.”

While historically, the ability to structure deals to meet this criteria would only have existed with experts in the largest banks and financial institutions, many are now looking to outsource this, making the launch of investment vehicles more accessible to a broader range of firms. 

Given the range of vehicles available including both off-the-shelf and bespoke structures, the previously untapped pool of capital held by non-institutional investors, estimated by McKinsey to be worth $45tn, is now being unlocked. Some vehicles are facilitating individual investments as small as £5,000, meaning firms can target certain types of investors who would have previously had no realistic access to these types of assets, without compromising on regulatory commitments.

As explored in the report, the use of investment vehicles alongside digitising and automating operational processes through third-party fintech suppliers gives firms the ability to offer their clients access to private markets deal flow in an organised and professional way. This, in turn, widens the pool of investors that can deploy their capital to alternative assets, all without the need to build their own expensive in-house systems.

As an expert in the field, Delio designs, builds and develops enterprise-grade investment vehicles that can be fully integrated with their market-leading technology to deliver an intuitive investor experience that supports a wide range of use cases. 

Each vehicle possesses unique characteristics to serve a variety of purposes and Delio’s structuring experts work with clients to advise which is most suitable depending on the firm’s objectives, the profile of their investor base and their geographical location, amongst other factors. Among the most popular are a Luxembourg Special Purpose Vehicle (SPV) and a Reserved Alternative Investment Fund (RAIF).

Businesses such as Investa Solutions are paving the way in demonstrating the success that can be achieved by having a one-stop solution that seamlessly integrates investor onboarding, investment distribution and administration support. Tullio Musso, CEO and Founder of Investa Solutions, commented:

“The efficiency I’ve gained through using the Delio platform is fantastic. The scalability factor is making a real difference and as a result, I’ve managed to grow quickly while still providing a high-touch service to all. I’m a strong believer in allowing more and more investors to access private markets and this solution is a huge step forward towards that.”

With the value of private equity assets outpacing public market capitalisation nearly threefold over the last 20 years, it’s clear why financial institutions and individual investors alike have sought to deploy their capital to alternative assets. The potential for long-term returns if utilised correctly are great, making it almost a matter of when, and not if, financial institutions engage with external investment structuring specialists. 

Download your copy of the report here