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Digital investment platforms for private capital – disruptor or enabler?

9 December 2022

David Sarfas

Country Head, Luxembourg

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David Sarfas

Country Head, Luxembourg

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Expert panellists at the ALFI Private Assets Conference discussed how the digitalisation of private markets will open up this asset class to a wider range of investors.

What does digitalisation mean for private capital – and is it a disruptor? Can technology create sustainable innovation, build transparency and provide access for a wider range of potential clients?

These were the issues debated in a panel discussion at the ALFI Private Assets Conference, which featured contributions from Adam Harrison, chief commercial officer at Titanbay; Nasir Zubairi, CEO of the Luxembourg House of Financial Technology; Maryam Longrus, director of product management at FIS; and David Genn, CEO of Gogi.

Disruptor or sustainable innovation?

Adam Harrison argued that the changes taking place in the market are definitely sustainable. “The technology is an enabler and not a disruptor because the sector has been underserved for some time,” he said.

“Digital investment platforms for private capital investments are a sustainable innovation. We service a historically underserved high-net-worth audience that were unable to consider private markets investing before.”

Maryam Longrus suggested that disruption and innovation are not mutually exclusive. “Technology is disruptive – but that is temporary and there is quite a lot of innovation at play here,” she said.

“Evolution is going to continue, where we see how we can leverage the technology that we’ve started to utilise to achieve greater efficiency.”

For David Genn, the benefits of greater efficiencies, the provision of access for wider investment groups and greater transparency are all down to better technology: “The end purchaser is looking across the value chain to see how tech can solve problems.”

Nasir Zubairi said technology in private markets was “revolutionary rather than disruptive”. He explained: “Tech is a source of competitive advantage to help firms cater for change. Fund management has not evolved its value chain over the past 20 years. Change is an inevitability; it cannot be resisted much longer.

“Now technology is helping to drive efficiencies and affecting that stasis, and I hope that change will be continuous.”

Technological advances in digital markets offer efficiencies

The panel reflected on the enormous changes that have taken place since the advent of the internet in the 1980s and how each decade has seen new capabilities in technology.

“We are now talking about the evolution of Web3 and the capabilities beyond that,” said Maryam Longrus. “We have only scratched the surface of what is possible. What we can do with technology is where there’s a lot more potential.”

She predicted that, as technology develops, it will bring about the democratisation of private equity, and that finance and product teams would in future communicate better with each other and break down silos.

David Genn said: “There is a real need for back-office order-management technology to digitalise the order routing between booking centres, banks and wealth managers, fund administrators and asset managers that are receiving them. If we can unlock that, it could be a big enabler.”

How will blockchain affect private market investment?

Much has been said about how blockchain might change financial services markets. Adam Harrison commented that he believes we are only at the beginning of tokenisation – and it will have a “profound impact on the efficiency of everything in the value chain”.

As most of the technology currently being used is based on existing infrastructure, blockchain is not yet a major part of companies’ plans. Harrison argued that the challenge over the next three to five years will come from changes to the regulatory environment, as that will have the biggest effect on the implementation of blockchain on a wider scale.

Perhaps the real challenge of technology is to spot the opportunities to streamline processes and products.

“Technologies are just enablers – it is how you use them that makes a difference,” said Nasir Zubairi. What is needed from financial services technology is simple, he added: “To make people money, to save money and to become more efficient. You need to be able to develop a solution that can solve that.”

Technology in private markets can draw retail investors

One of the opportunities that technology offers is the potential to open up private markets to a wider range of investors.

“The secret is going to be why and how do we make digital platforms for private markets investment sustainable?” said Maryam Longrus. “There is good reason to open this space to high-net-worth individuals and family offices, and not just the largest players and the institutional players. As long as the motivation is there, we know the technology makes it feasible.”

Adam Harrison said that the industry has long benefited from demand exceeding supply. “General partners have serviced a smaller number of larger clients and haven’t needed to solve many of the challenges of dealing with scale.”

“Technology will in the future provide the opportunity for products to be brought to new investor sectors and populations for the first time.”

As capital markets and financial services are becoming increasingly digitalised, there has been a move from low volume/high fees to high volume/low fees, says Nasir Zubairi. “Every asset class has gone through that and I would expect the same to happen for private assets.”

He also pointed out that technology enables people to become more productive and, while their jobs might change, it will not entail a loss of employment. “No industry in the world that has been through an industry revolution employs fewer people than it did before,” he said. “It’s about moving people to higher-value, productive roles rather than paper shuffling.”

Why Intertrust Group?

  • As a strategic partner, we offer a full-spectrum service tailored to meet all services and operational needs throughout the lifecycle of a private capital fund. This is against a background of ever-increasing reporting demands.
  • Intertrust Group has 70 years’ experience providing world-class trust and corporate services to clients around the world. Intertrust Group has been acquired by CSC, the world’s leading provider of business, legal, tax and digital brand services, worldwide.