Category: News

Subscription documents and the need to modernize the process for alternative investments

The subscription document is the “last mile” of the alternative investment process.  It doesn’t matter if it is a Hedge fund, a Private Equity fund, or a Real Estate fund, the only way for an investment to become real is via the execution of a subscription document.

It usually doesn’t take long once we bring up the topic of subscription documents in our conversations with fund managers, fund administrators, and private banks before frustration is expressed.  In fact, we typically hear two things when talking about subscription documents with our clients; (1) how important they are, and (2) how difficult they are to complete in a reasonable period of time.

No one disputes the first point, but the second point is worth looking into more deeply.  A subscription document for alternative investments is typically a 50+ page document.  In addition to important information on the fund as well as the terms needed to invest in that fund, the subscription document requires the parties involved to populate fields to complete it.

Compounding the frustration, only a fraction of this 50+ page document is relevant to any single investor.  Depending on the type of investor, only a portion of the subscription document is needed to be filled in.  As an example, if you are an individual investor, you would fill out a different portion of the subscription document than if you are investing within your IRA.

The reason that the subscription document takes a while to complete is not typically because of the quantity of fields that need to be populated.  These fields are usually not very complicated, and often include basic personal information (e.g., name, address, etc.) as well as other important details like the amount of money that will be invested, bank instructions, and more.

Rather, the reason for the delay is usually because of two other factors.  The first is that it is very time consuming to re-input often similar or identical information across multiple fields within the same document.  As an example, we looked at a standard subscription document and found that the investor needed to populate her name & address 3 different times within one subscription document!

The other factor helping to cause the subscription document delay has to do with the number of approvals that are needed, the manner in which changes might be made to the document, and how signatures are gathered from the approvers.  Finalizing a subscription document typically requires the approval and signature of the investor, the fund manager, the fund administrator, and sometimes more.  A fund administrator will often have multiple levels of approvers ranging from Legal, Compliance, Operations, and more.  Many times physical signatures are still used instead of electronic ones, so this often adds to the delays.

Importantly, if at any stage of the approval process the person being asked to sign finds a mistake or wants to make a change, then the document typically gets passed back and forth via email or some other manual method.  There is rarely an effective manner to keep track of the status of the desired changes, or the expectation of when they will be made, which often leads to confusion.  This results in a lot of “chasing” that needs to be done, which burns time.

This subscription document problem is a perfect example of why we created BaseVenture.  The subscription document process utilizing BaseVenture’s powerful platform is radically more simple, fully electronic, and much quicker.

First of all, most of the information needed to populate a subscription document is already in our secure cloud, and it gets automatically filled out within the appropriate places in the subscription document. BaseVenture’s platform has built-in logic driving the user to address only the relevant portions of the subscription document and ignoring the vast number of areas that are not relevant to the user.  Importantly, this information continues to be accessible and usable for any need throughout the subscription process.

Secondly, the people reviewing and signing the document do this entirely online, with an intelligent workflow attached to it so that it is very clear which step in the process the document is in, who is on point, and what the next step will be in the process.  Any changes or corrections that need to be made to the document by an approver are done at intuitive points within the workflow online, and are able to be previewed in context by the approver.  Any changes made are updated and synced so that the changes are now data in our platform rather than one-time mark-ups on a document.

Lastly, once the subscription document is completed, this document doesn’t reside somewhere hidden in a filing cabinet, or buried in someone’s Email Inbox.  The subscription document is now data that resides in the cloud, with a layer of intelligence added to it that enables powerful tagging, sorting, and more.  And of course the subscription document is always available for viewing, printing, or sharing purposes.

Learn more at www.baseventure.com

Fund Managers & the operational struggle to raise capital for their funds

Here at BaseVenture we talk to fund managers regularly about the areas that they struggle with as they go about their daily jobs.  Our FundManager.io platform is targeted at the small to medium-size fund manager, typically with Assets Under Management (AUM) of less than $1B.  These could be hedge funds, private equity funds, real estate funds, and more.

One of the most frequent complaints that we hear about relates to how a fund manager can raise capital.  Attracting and “closing” new investors is the lifeblood of any fund, and it is one of the most consistent activities that fund managers have to practice and master in order to succeed.  In fact, according to an article from DarcMatter, “For new funds, the biggest challenge is getting off the ground and raising capital.”*

There is a lot that a fund manager needs to do in today’s environment to attract new investors to his/her fund.  According to a 2015 Preqin study, the majority of fund managers cited an increase in the level of competition over the previous 12 months.**  Thanks to the easy availability of information on the Internet, and in part as an after effect of the financial crisis, investors are both more informed and anxious as ever about investing money in new funds.  Beyond any potentially strong relationship skills that a fund manager may have, any fund manager looking to attract new investors needs to have a well-articulated market plan, a smart sales strategy, effective marketing materials, and more.

Fund managers that we talk to often don’t mind this part of the job, and in fact several say that attracting new investors gives them their biggest sense of satisfaction.  However, the complaints generally begin when we start to delve into the operational process that the fund manager follows to get a new investor.

Most small to medium-sized fund managers use a hodge podge of tools to “manage” their pipeline of new investor prospects.  These tools range from spreadsheets to keep names and calculate probabilities, to email Inboxes or over-priced CRM solutions to keep notes & contact information, to their own memory to recall where things stand with a given prospect.

Most of these tools are not really connected to each other, and there is a significant amount of re-work that happens each time a new investor prospect is added, or even each time some important fact about an existing investor changes.  This translates to the average fund manager spending a significant amount of time on operational activities that can often become a major time suck, as well as a big source of frustration.

Unfortunately, getting the operational side working well is a major determinant in the overall success of raising capital.  So fund managers literally can’t afford to neglect this important area.

A fund manager that uses BaseVenture’s FundManager.io platform can tackle the operational needs of raising capital much more simply and effectively.  Our fund manager clients maintain their list of investor prospects in the Cloud, where it is safe, secure, and is available to them whenever and wherever they need it.  All of the important information that the fund manager meticulously gathers about their investor prospects during the sales process is added to robust profiles, and is reusable for any business need that the fund manager may have.  The fund manager can make changes anytime on anything from a simple address change to a more sophisticated pipeline probability report, and much more.

One of our most important missions here at BaseVenture is to help give back the gift of time to fund managers, by letting them spend less time worrying about their operations, and more time focused on attracting new capital and driving higher returns for their investors.

Learn more at www.baseventure.com

 

Sources:

* DarcMatter: “Challenges Hedge Funds Face WHne Raising Capital” May 12, 2015.  https://www.darcmatter.com/blog/challenges-hedge-funds-face-when-raising-capital/

** ValueWalk: “Hedge Fund Managers Find Fund Riasing Challenging: Preqin” Aug 27, 2015                

 

It’s time to transform fund management and administration

CEO, BaseVenture

It’s time to transform fund management and administration.

What’s the Problem?

Fund management and administration is inefficient, antiquated and overpriced.

  • Funds that outsource their operations are underwhelmed and overcharged.
  • Funds that do it themselves struggle with expensive and outmoded technology

Note: These are private funds spanning real estate, hedge funds, private equity, venture capital, etc. — these are not the mutual funds and REITs on the public market.

Why does it matter?

  • Money invested in alternative investments will grow from $10T to over $18T (yes, Trillion) by 2020.
  • For small firms this is nearly all of their 2% management fees; for medium size guys it’s half their fees.
  • The costs to run these funds, particularly 3rd party fees is CRAZY!  Take a look at the chart above.  Thanks, Citi Prime Finance.
  • 80% of these funds are considered small ($250M in assets) or medium ($250M-$1B in assets) in size.  So there are like 40,000+ of them ready for a better way.

What’s the answer?

We looked long and hard and couldn’t find one.  So we created one.

The solutions for big funds are old, expensive and ill suited to small and medium sized funds (most of them).

BaseVenture (www.baseventure.com) gives fund managers the 3 things they want the most:

  • More time to raise capital and generate alpha
  • Less work and headaches
  • Lowers costs and increased investor satisfaction

Who’s it for?

BaseVenture is designed for fund managers and fund administrators (that help fund managers). It’s also great for private banks that want a better way to integrate their front and middle office and better serve their investors.

Learn more @  www.baseventure.com

© 2014-2016 Base Venture Investing, Inc.