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