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Jan 9, 2023

New UK Firm Puts Private Market Menus On Table

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In early November, private markets firm Partners Group announced that it was setting up a private wealth unit. The move was designed to capitalise on the growth of the private wealth management space.

According to Partners Group, its private wealth business accounts for nearly a third of the firm’s US$131 billion of assets under management. To increase this amount, the firm intends to carve out private wealth from its institutional activities, emphasising “these clients’ differentiated needs”.

The move follows in the footsteps of other private markets firms. In February, KKR announced its 2021 results and its intention to boost capital inflows from its private wealth channel. “Historically, private wealth has contributed about 10% to 20% of the money that we raise annually,” said CFO Robert Lewin.

“With the investments we’re making in people, technology and new product innovation, alongside the strength of our brand and our track record, we believe over time that it should be 30% to 50% of the money that we raise.”

The objectives are twofold: to make private capital more accessible in terms of both liquidity and minimum investment levels and to create offerings more in keeping with traditional wealth management platforms and services.

Track record

Both Partners Group and KKR stated that technology would play a prominent part in their private wealth management efforts – investing in their own platforms as well as striking partnerships with fintechs and their service providers.

However, the private capital market does not have a great track record when it comes to technology.

According to research commissioned by specialist fund administrator Intertrust, private capital funds are guilty of an “ad hoc” approach to adopting new technology that is now causing them a range of operational problems.

The study, ‘Introducing the Halo Framework’, interviewed 150 “senior decision-makers” at private capital firms and found that just 6% of the participants said they had developed what they consider to be a “mature tech platform incorporating next-generation technology across the firm”.

It is unlikely private capital firms will look to build or adopt any tech in-house. Instead, we are likely to see greater outsourcing to third parties and vendors, as stated by 58% of respondents.

“By their own admission, most private capital GPs have been slow to fully embrace and invest in new technologies to improve their operating models,” said Chitra Baskar, president, fund solutions, Intertrust Group.

“By their own admission, most private capital GPs have been slow to fully embrace and invest in new technologies to improve their operating models.”

“As private capital firms progressively look to upgrade, update or modernise their operating model, they are increasingly looking for trusted third-party vendors and partners that can provide established platforms and solutions to support their technology needs.”

While the likes of Intertrust and other specialist fund administrators will doubtless look to capitalise on this sales opportunity, fintechs are also looking to supplant themselves in the fledgling private wealth management space.

Private Markets Alpha launched in October 2021 with the objective of improving access to private markets for wealth and asset managers via its online digital platform.

“We aim to revolutionise private markets investments because we firmly believe that broad access to these markets is crucial for providing a wider range of asset classes to better serve the long-term needs of individual investors,” says Tom Douie, founder and CEO of PM Alpha........

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