Alternative investment—including private equity, hedge funds, real estate funds, and others outside the public market—is becoming more accessible to high-net-worth investors, thanks to the spread of fintech technology, which uses computer programs and other technology to improve activities in finance.
Keeping abreast of the fintech revolution, two major Wall Street firms, JPMorgan Chase & Co. and the Carlyle Group, on Thursday joined forces with iCapital Network, a fintech startup founded in New York in 2013.
In addition to using their own balance sheets to finance iCapital, both JPMorgan Chase & Co. and the Carlyle Group also leveraged iCapital’s technology platform to administer their wealth management, the firms announced.
This news comes just a week after Blackstone Group announced a stake in iCapital.
Other firms that have backed or leveraged iCapital’s innovative technology platform include BlackRock, Morgan Stanley, UBS, Fidelity, AllianceBernstein, HSBC, and more.
These partnerships underscore the confidence placed in iCapital’s ability “to achieve our goal of streamlining access to alternatives and automating the industry overall,” says Lawrence Calcano, the company’s CEO.
The company’s technology platform supports the unique subscription, administration, tracking, and reporting processes of alternative investments. Additionally, it provides due diligence, education, distribution, and marketing services.
Traditionally, most alternative investment assets have been held by institutional investors because of their complex natures and stricter regulations.
“We saw the opportunity to build a tech-enabling platform that bridges the gap between institutional-quality alternative-investing opportunities and the high-net-worth community,” says Calcano, who previously spent 17 years at Goldman Sachs & Co.
Using iCapital’s technology and service platform, Calcano says, an advisor who previously couldn’t write a multi-million check into a fund, can now process increments of smaller investments.
Private equity funds, most of which have a minimum requirement of $10 million to $20 million, can be open to investments as low as $100,000, if aggregated by iCapital’s technology.
“This will create opportunities for high-net-worth investors to truly build a diversified portfolio in alternative investments,” Calcano says.
Today, the opportunity to access alternative investments is especially important to the high-net-worth community. Data collected by iCapital shows that the number of publicly listed companies in the U.S. has dropped by half over the last two decades, meaning most economic growth is taking place outside of public markets.
Meanwhile, private equity funds, hedge funds, and other alternative vehicles provide exposure to growth opportunities and have the potential for diversification and risk mitigation.
In 2018, private equity alone accounts for 22% of the average family office portfolio worldwide, according to a report published by London-based Campden Wealth earlier this week.
“We bridge two groups of people—advisors and banks serving the high-net-worth community on one hand, and the private fund managers on the other,” Calcano says.
This September, the company entered into a definitive purchase agreement to acquire Bank of America’s alternative investment feeder funds, which has approximately $20 billion in client assets. The acquisition is expected to close next year