Mark Woolhouse, CEO and Co-founder, Treble Peak
The universe of private markets is vast and continuously expanding. Total AUM has grown at nearly 14% per annum since 2013, and McKinsey states that PE has begun to ‘emerge from the fog’ in its latest report on private markets. Over 70% of US and European companies with revenue over $10 million are not listed on public exchanges. However, access has been limited predominantly to institutional investors, as the investment process is complicated and time-consuming, and the investment minimums are out of reach to all but the ultra-wealthy. This complication – along with the minimum ticket size – precludes many from these investment opportunities because they do not have the requisite knowledge or capital to participate.
These barriers to entry are exacerbated by a lack of transparency; unlike the public markets, information on funds and underlying assets is not readily available. For those without an extensive network of people to turn to for insight about valuations and pricing, the lack of transparency is a deterrent. Simply put: transparency boils down to greater access and insight. So how do we rectify this?
The role of technology and data
Transparency inspires confidence, while a lack of it breeds scepticism. As such, plenty of airtime is dedicated to this issue in the private markets. However, there’s not enough data on the funds themselves or the underlying assets they invest in – access to such information is often limited to institutional investors only.
We know that technology is the answer to many of society’s problems; from modern medicine to transportation and communication, technology has a role to play in making our lives easier. Why should private markets be any different?
Gone are the days when private equity investors rely solely on tools such as spreadsheets to manage their portfolios. Now, there are portfolio and ‘visual management systems’ that enable GPs and LPs to track the value of their portfolios in real-time.
Other solutions, like Treble Peak, which I co-founded, deliver sourcing, structuring, and technology solutions for wealth managers, direct investors, and fund managers. This will not only provide wealth managers with a platform to easily monitor and manage an investor’s portfolio and capital commitment but also help facilitate access by lowering the threshold to private market investment opportunities. Our platform facilitates the flow of capital into the private markets.
A lower barrier to entry will attract a broader and more diverse profile of investors. When sophisticated investors have the same level of access granted to institutional investors, the market opens up. Leveraging technology can create a coveted knowledgeable network and provide industry transparency more widely so that it becomes less of an unknown “other” or “club” where only a select few can be members.
Unlocking investment
More money is needed to unlock investment for private market funds. Utilising technology and creating the necessary platforms will offer sophisticated investors the same level of information and access granted to institutional investors. If we could unfurl the market in this way, GPs would be able to access a hidden pool of investors. By enabling ultra and high-net worth investors (including families and wealth manager clients), who collectively form circa 25% of all potential investment capital worth $60-$80 trillion globally, the potential LP base widens greatly. This would allow this investor base to benefit from and contribute to growth and innovation in private companies.
With more transparency, we can access a substantial hidden pool of investors, noting the enormous scale of this investor base. When this investor base’s access has been unlocked, there will be more money for private market funds, which can in turn, invest in innovative companies that fuel economic growth across the UK and beyond.
A thriving ecosystem
Technological advances are crucial to seeing great capital returns so that not even sophisticated investors are locked out of investment opportunities. Technology can open up a larger pool of investors, in turn enabling more new companies to start up and eventually scale. This supports economic growth through job creation and further investment back into the economy. When private markets become more accessible – in regard to both the number of people and how transparent and easy to understand it is – there is more capital for GPs to invest. As a result, this increase in funding will propel the UK and Europe forward.
