Top 3 reasons why Private Equity & Real Estate funds will need Fund Administrators in 2017

Fund Administrators are not currently as big a presence with Private Equity and Real Estate funds as they are with Hedge funds.

But Private Equity and Real Estate funds should take note, because Fund Administrators are becoming increasingly critical to how they go to market.

Fund Administrator penetration of the Hedge fund market is somewhere north of 80%, and having a Fund Administrator has pretty much become a requirement for Hedge funds of virtually any size.  With around 11,000 Hedge funds in the US, we are talking about a large base of funds that are using Fund Administrators.

There are close to 4,000 Private Equity funds in the US, and the growth of these funds has been enormous.  Private Equity assets have risen from $30 billion in 1995 to around $4 trillion in 2015.  All indications are that growth will continue to be steep, as around 64% of LPs plan to increase their allocation to Private Equity funds, which is up from 26% just 5 years ago.

Despite this dynamic in Hedge funds, Fund Administrators have not penetrated Private Equity and Real Estate funds in the same way.  Estimates are that penetration by Fund Administrators of Private Equity & Real Estate funds AUM is only around 30% today, and projected to increase to 45% by 2018.

I think this growth projection is understated, however, because many of the reasons that compelled Hedge funds to begin using Fund Administrators also apply to Private Equity and Real Estate funds.

Here are 3 key reasons why Hedge funds had to begin working with Fund Administrators and why these also apply to Private Equity & Real Estate funds:

  1. Investor demands for greater transparency

I think that this is going to be the biggest driver that will force Private Equity and Real Estate funds to use Fund Administrators.  Investors are increasingly demanding third party validation of AUM and Net Asset Values, as well as greater transparency in reporting.

Particularly when institutional investors are factored in, the process of operational due diligence of a fund is occurring earlier in the RFP process.  Institutional investors and/or large individual investors want to have confidence in the middle & back office capabilities of the fund, which generally means a strong accounting and reporting practice.

If these investors don’t have confidence in the management company, then they will increasingly pass on the opportunity.  One recent Private Equity study shows that 64% of LPs are increasing the level of operational due diligence that they are performing on GPs.  In fact, this same study showed that 71% of respondents stated that the most obvious change occurring in recent years has been the rising demand for transparency, providing more visibility into risk, operations, performance, and valuation than ever before.

2. Increasing Regulatory & Compliance pressures

This really started to materialize in the aftermath of the Bernie Madoff scandal, with acronyms like KYC, AML, FATCA and others fast becoming part of the lexicon.

The conventional wisdom that I’ve heard is that Regulatory & Compliance pressures aren’t the same for Private Equity and Real Estate funds because the level of activity is less frequent.  I always find this argument to be short-sighted, because some of these regulations already apply to fund types beyond just Hedge funds.  Indications of the impact of regulatory costs are already materializing in Private Equity, with more than 8 out of 10 GPs saying that compliance costs are climbing faster than other operating expenses.

“Adapting to new regulatory regimes” was listed as the top concern in a recent Linedata survey of fund managers and fund administrators, coming in nearly 20 basis points above the next closest concern.

3. Technology as a requirement

Technology is already a means of differentiation among progressive Private Equity and Real Estate Fund Managers.  My feeling is that technology should be a requirement for all of these fund managers.

Technology can provide an effective means to address points #1 & 2 above, but how technology is best employed can be tricky.

When it comes to technology, there are two typical approaches that are taken.  The first approach is often for the management company to try handling it on their own, including attempting to build out technology themselves.  The second approach (often after having been unsuccessful in the first step) is for the management company to manage an external technology vendor/platform on their own.

Either way, the experience often ends up with the same result: handling technology on their own takes more time, personnel, and money than they initially expect.

Private Equity and Real Estate fund managers should instead look to Fund Administrators to implement and manage technology that they need.  Fund Administrators are better suited to adopt and manage technology given that it is required by all of their fund manager clients.  This is also a more cost effective solution for fund managers, because Fund Administrators are better suited to bear and spread the cost of technology across their clients.

Fund Administrators are already getting the message about the importance of technology, as evidenced by a recent study from Longitude Research that shows that 4 out of the 5 “Top Trends” that Fund Administrators listed that will shape their future between now and 2020 relate to technology.

Fund Administrators as the answer

Private Equity and Real Estate Fund Managers that still think they can go it alone without the help of Fund Administrators are going to quickly fall behind, and lose out on growth opportunities.

Beyond the points made in this article, Private Equity & Real Estate Fund Managers should listen to the words of Kevin O’Neill, managing member and co-founder at Broadscope: “If you have a strong back office, it won’t necessarily win an investor, but if the back office is weak, it’s very likely that you won’t get the job.”

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  1. “The $64 trillion question: Convergence in Asset Management”, February 2015
  2. Hedge Fund: Tiburon CEO summit materials. Private Equity: 2015 Preqin Global Private Equity & Venture
  3. 2020E AUM.  PWC Asset Management 2020 - A Brave New World
  4. Pensions & Investments: “Private equity firms embrace outsourcing. More managers go with outside administrators, driven by sophisticated strategies, client needs”, March 2014
  5. HedgeWeek: “Convergence drives strategic operational partnerships”, October 2016
  6. SEI “The Future of Private Equity”, October 2016
  7. Linedata “2016 Global Asset Management & Administration Survey”, October 2016
  8. Longitude Research “From Coal to Diamonds: 2020 Vision – The Future for Fund Administrators”, 2016

Linedata “2016 Global Asset Management & Administration Survey” shows what keeps Alternative Investment professionals up at night

We are always on the lookout for reports that offer insights into the alternative investment industry.  Linedata has come out with a great report with their “2016 Global Asset Management & Administration Survey.”

There were 2 areas that were especially interesting about this report:

  1. Main challenges that the industry faces

  2. Ways that key stakeholders can distinguish themselves with their clients & customers

Areas of Challenge

This report shows that regulatory as well as operational concerns are top of mind with fund administrators, fund managers, and other alternative investment stakeholders.  Surprisingly, these two concerns are even more important than other seemingly critical concerns like fund performance, new products, and more:

Looking deeper at regulation that has had the greatest impact, respondents mostly listed regulations that were designed to change behavior and alter the environment in which they operate.  The following were the regulations that have had the greatest impact:

Areas of Differentiation

The other area that was very insightful from the survey was how firms and service providers see the opportunity to differentiate themselves.  Below is a great infographic from the report showing how client service is perceived as a key differentiator by stakeholders:

We also noted that technology doesn’t individually pop out as one of the top 5, but technology is indelibly linked to other areas that popped like innovation, product offering, research, and others.

Interestingly, other areas that one would think would be critical (e.g., reputation, expertise) didn’t come up as often as differentiators.

Technology as an Answer

From our standpoint, there is a strong alignment between the key findings of this report and the reasons why we created BaseVenture.

Baseventure’s software is especially targeted at fund administrators, and we help them:

(1) adapt to new regulatory regimes

(2) maintain operational efficiencies/cutting costs

(3) improve client service as a means of differentiation

As Linedata put it themselves:

“Now is the time to embrace digitization to gain competitive advantage in this dynamic market.”

For more context on this report, 2016 is the sixth year of the Linedata “Global Asset Management and Administration Survey”, with respondents spanning fund administrators, asset managers, hedge fund managers, and other stakeholders.  The survey had 200 respondents, with representation coming from Europe and North America.

You can find the entire Linedata report here.

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Putting the “Investor” back into “Investor Relations” for Alternative Investments

Private funds are the fastest growing category of investments, with estimates of current assets reaching $10T, and projected to grow to $18T by 2020.  As the economy has recovered from the Great Recession, more and more investors have entered into alternative investments.

This spike in both money and investors has significantly increased expectations around how private funds are managed and administered.  Investors expect their alternative investment experience to be similar to what they have with banking & public securities: a digital experience that is informative and easy to use.

Unfortunately, the reality in private funds is not meeting expectations, and this is being felt most strongly by fund administrators.  The role and importance of the fund administrator has increased dramatically over just the past 5 years.

In many ways, the fund administrator has become the conduit for the complex interactions between not only the investor and the fund manager, but also for the interactions between the fund manager and other key stakeholders like auditors, attorneys, etc.

Driven by increasing investor expectations, private fund managers are placing greater pressure on their fund administrators to help better service their investors.  The clearest evidence of this is that nearly 30% of private fund managers have fired their fund administrator in the past 12 months, as reported in the “Preqin Special Report: Private Capital Service Providers” study that we wrote about here.

With investors in particular, many fund administrators have established an Investor Relations (IR) group to try to better handle communications and interactions with not only their clients, but also with investors.

That said, a new Investor Relations survey on hedge funds from IRHalo shows that investors’ expectations are not being met across a variety of categories including communications and reporting.

There were several insights from the IRHalo study that jumped out at us:

  1. Investors generally find the quality of data and detail being provided by hedge fund IR groups is unsatisfactory
  2. Most investors are dissatisfied with the quality of the information provided on their website – and only a minority of hedge funds actually see their website as an IR tool
  3. Investors would like to see more qualitative information on hedge funds, both within their own reports, and more widely available

In order to better meet investor expectations, progressive fund administrators are looking at technology as a key solution.  Longitude Research published a recent report that showed that technology imperatives dominate the “Top 5 Trends” that will shape the next 5 years for fund administrators.  “Improve transparency and reporting” was one of those trends, which aligns strongly with the findings in the IRHalo study.

Technology can help fund administrators deliver a better digital experience that makes it easier for investors to:

  • See useful digital charts and reports detailing fund performance
  • Have the flexibility to look at both account-level as well as portfolio-level views
  • Be able to interact & communicate with their fund managers
  • Reduce the reliance on paper documents, while also making it easier to access key documents online


Investors compare their experience interacting with private funds to the experience that they have accessing their mobile banking & securities accounts.

Fund Administrators need to be the ones to cross the chasm between investors’ expectations and reality.

Our team at BaseVenture is dedicated to being the technology partner that a fund administrator needs to better meet the current & future needs of this dynamic industry.  We are their answer to putting the “Investor” back into “Investor Relations”.

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More Private Fund Managers switching their Fund Administrators

Private Fund Managers are demonstrating an increasing willingness to look for new Fund Administrators – nearly 1/3 of them have switched in just the past 12 months.

A recent study titled “Preqin Special Report:
Private Capital Service Providers” shows that if a Private Fund Manager feels that the quality of the service is poor, or if the cost is too high, they will fire their Fund Administrator and look for a new one.

Our team at BaseVenture is dedicated to helping Fund Administrators better service their Private Fund Manager clients, ultimately resulting in happier investors.  We help Fund Administrators to simplify and streamline how they administer a fund.  We save them time by eliminating much of the manual operational burden that they face today.  This helps ensure that they avoid the churn highlighted in this study.

This report is full of some great insights, but here are a few that help show why Fund Administrators should be concerned:

  1. 28% of Fund Managers have switched their Fund Administrator in the past 12 months:

2.  Cost and quality of service are the two primary reasons for switching Fund Administrators.  But regulation is a factor too, with 21% changing their Fund Administrators due to regulation needs:

3.  We were surprised to see the frequency with which Fund Managers are formally evaluating their Fund Administrators, with 9% reviewing every 6 months, 34% reviewing annually, and 24% reviewing each time they bring on a new fund:

4.  Also surprising is that Fund Managers don’t think that their investors are concerned about price increases.  Many costs are passed to investors either thru management fees or specific expense pass-through charges.  As you’ll see below, a larger percentage of Fund Managers thought that investors would not be concerned by increased costs than the percentage that thought that investors would be concerned.

5.  The good news for Fund Administrators is that Fund Managers are increasingly looking to outsource some key functions. Here are two graphics that show current as well as future outsourcing plans:



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If you’re interested in reading the “Preqin Special Report: Private Capital Service Providers” (July 2016) report, you can find it here.

Demand for Alternative Investments is Increasing

Alternative investments are growing rapidly, and are becoming an increasingly important investment vehicle.

This insight was reported in a new study from Cerulli Associates called “U.S. Alternative Products & Strategies 2016: The Multiple Roles of Alternative Investments.”

Our team at BaseVenture is dedicated to helping simplify and automate how alternative investments are administered and managed.  We were very encouraged to read about the increasingly critical profile that alternative investments are taking in the investing “toolkit”.

Increasing demand will place more pressure on improving the efficiency with which alternative investments are administered & managed.  And that is exactly where BaseVenture helps our fund administrator, fund manager, and private bank clients.

A significant amount of money is flowing into alternative assets. According to Cerulli, this exceeded $7.5 trillion at the end of 2015.  In fact, we’ve seen other studies that report that money invested in private funds will grow to $18 trillion by 2020.

The quote that we think best sums up the report is:

“Expectations regarding future capital market returns and the need to optimize risk-adjusted performance are the leading drivers of investors’ interest in alternatives,” explains Michele Giuditta, associate director at Cerulli. “With equity and bond valuations stretched, the potential diversification benefits and alpha provided by alternatives appear favorable on a relative value basis.”

Thanks in part to the desire for greater performance and diversification, alternative investments are gaining an increasing influence among both investors and advisors.

According to the report, alternative investments are forecast to grow to 5.3% in 2 years, 7.8% in five years, and 11.7% in 10 years.  Open-ended mutual funds are the most widely used vehicle in which to “wrap” alternative investments.

Investors are more aware and interested in alternative investments.  Cerulli reports that 40%+ of managers received multiple requests for alternative investment products over the past few months.

That said, there is still plenty of more room to grow.  According to Cerulli, the mean allocation of alternative investments is still less than 5% of overall assets.  Depending on the source, we’ve read that the ideal allocation of alternative assets should be in the 15% - 25% range.

Both 401K Specialist, as well as Plan Sponsor wrote great articles summarizing the Cerulli report.  The report itself is available for purchase at Cerulli’s site.

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Source:  Unless otherwise cited, all quotes and metrics included in this blog post were taken from the “ U.S. Alternative Products & Strategies 2016: The Multiple Roles of Alternative Investments” report via the articles by 401K Specialist & Plan Sponsor

“2020 Vision – The Future for Fund Administrators” report – a must read for Fund Administrators

Longitude Research, in conjunction with FIS, has published a report called “From Coal to Diamonds: 2020 Vision – The Future for Fund Administrators”.

This report is a “must read” for fund administrators.  It paints an urgent picture about the importance of technology in the alternative investment industry.  This study connects directly to the work that we’re doing here at BaseVenture.

This is most strongly evidenced by the following quote:

“Those administrators that do not invest in innovative technology could fail to provide the new and improved tools that asset managers are looking for – and risk being left behind.”

This quote will probably strike fear into many Fund Administrators, but it perfectly sums up the role that we play as a vital partner and enabler for our Fund Administrator clients.

Below are some overall themes that jumped out at us from this great report.  These quotes have strong relevance to the work that we’re doing at BaseVenture:

  1.  Technology imperatives dominate the “Top 5 Trends” that will shape the future

There are 5 “Top Trends” that were listed as the key factors shaping the future for Fund Administrators.  As you can see from the graphic below, 3 of the top 5 relate to technology.

2. Regulatory and compliance requirements will have an increasing importance & impact

This theme was seen across several areas of the report, but it is best summarized by:

  • “To keep pace with regulation and the due diligence demands of investors, 89% of fund administrators anticipate having to make investments in new systems and technologies before 2020.”
  • “Unsurprisingly, more than half of administrators (51 percent) predict that the need to keep pace with regulation will have the greatest impact on their activities between now and 2020, making it the most significant asset management trend of the next four years.”


3. Differentiation by Fund Administrators will be indelibly linked to technology

  • As the sophistication of investors increases, the status quo service will no longer be enough for Fund Administrators:
    • “But, potentially more importantly, investors themselves are doing more and more due diligence on providers. It’s no longer good enough for asset managers to simply promise to generate a return from their black box, even if they have a long-term track record of doing so.”
  • Data capabilities across key processes, as well as real-time data and reporting will be key to enabling Fund Administrators to differentiate themselves:
    • “When technology tools are centered around exception management and workflow, automating standard processes, it elevates the role of the fund administrator. Freed up to work with asset managers on more complex scenarios, administrators can begin to take on the role of a business partner and add value at the service level.”
    • “Nearly a quarter (23 percent) expect to be affected by their clients’ increased appetite for risk insight, presenting a premium service opportunity for fund administrators in the form of big data analytics and segmentation.”


4. Competition is coming in multiple shapes & sizes

Competition is coming from friend and foe alike:

  • “In this uncertain, newly competitive environment, automation can help administrators protect their margins by enabling them to cut costs and increase scale.”


We are partnering with forward-thinking Fund Administrators to help them meet the critical & required needs outlined in this report.

Our Software-as-a-Service (SaaS) platform was built specifically for the alternative investment industry.  It is focused on data relevance and transparency, and it enables easier and more auditable workflows to meet the growing regulatory and compliance needs.  We help Fund Administrators better differentiate themselves by increasing the value and improving the service that they offer to their Fund Manager clients.

If you’re interested in more context, this is a comprehensive study that surveyed almost 60 Fund Administration executives spanning the globe.  The representation among those Fund Administrators was broad, with a relatively even spread across a varying size of administrators.  Size was determined by number of funds administered, as well as by Assets Under Management (AUM).  Additionally, in-depth interviews of more than 15 leading asset managers, fund administrators, and other subject experts was conducted in order to add qualitative insights to the quantitative data.

You can find the full study here.

Learn more about BaseVenture and how we are helping Fund Administrators at

Source:  All quotes and graphics included in this blog post were taken directly from the “From Coal to Diamonds: 2020 Vision – The Future for Fund Administrators” report

eVestment’s “Alternative Fund Administration 2016 Industry Survey” highlights importance of operations & technology

eVestment recently published the 16th edition of their seminal Alternative Fund Administration survey.  The key insights from this year’s edition highlight the importance of innovative operations & technology solutions for fund administrators.

We wanted to underscore some important points that jumped out at us from the survey.  First, let’s start off with some good news for the industry in general, and for Fund Administrators in particular:

  • Alternative investments continue to grow as an important avenue to improve performance and provide greater diversity within investment portfolios
  • Growth was most strongly seen in Private Equity and Real Estate, and firms in these asset classes are increasingly looking to third party administration for help
  • Fund Administrators that have been dedicating both financial and human resources to improve their offering have become key players in the ongoing health of the alternative investment industry


Now, let’s talk about some of the more sobering insights from the survey:

  • Many see massive changes looming in the alternative investment industry – especially with Hedge Funds. This is translating into some real concern, and the expectation is that there is trouble on the horizon
  • When respondents were asked whether they “foresaw net entries or exits from the fund administration industry”, almost 74% of respondents answered “exits”
  • Increasing regulatory procedures and requirements are adding complexity and additional workload, which is making it harder for fund administrators and fund managers alike to stay current and afloat

For us here at BaseVenture, much of the results of this survey served as validation of the important role that we are aiming to play with Fund Administrators, Private Fund managers, and Private Banks.

Here are three quotes from the survey that jumped out at us, because they nearly perfectly sum up  the problem that we help solve:

  1. “The subsequent demand for institutional quality infrastructure and the imposition of new regulatory regimes have required a renewed emphasis on operational accuracy and efficiency.”
  1. “Overall, fund managers realize that they will have to put more focus on cyber-security and technology solutions to improve administrative capacity. One administrator explained, ‘Apart from regulatory events and financial market conditions, we expect an increasing tendency for client firms to be savvier about core technology, control environments, cybersecurity, and investor presentation. As a result, there will be growing demands for technology maturity amongst fund administrators.’”
  1. “One large U.S.-based fund administrator said that while managers have stuck to their performance fees, management fees have been adjusted by funds. However, as ensuring compliance and transparency has become more expensive, it has been harder to make reductions in management and incentive fees.”

We created BaseVenture to help Fund Administrators, Private Banks, and Private Fund Managers spend less time on operations, and more time generating growth.  Fund Administrators and Fund Managers who are feeling the pain points detailed in this survey should know that BaseVenture can be a valuable partner.  We can help them further position themselves to take advantage of the opportunity that this industry still holds.

The survey is full of really compelling insights into the state of the alternative investment industry.  It includes funds with over USD $6.6 trillion in combined total assets under administration, and consists of hedge funds, private equity firms, real-estate funds, funds of funds, and liquid alternatives.

We encourage everyone in the industry to read this survey.  We especially recommend that fund administrators read it.  The survey can be found at eVestment’s site here.  There is also a great recap of the survey from Tabinda Hussein at ValueWalk that can be found here.

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Sources:  All quotes included in this blog post were taken either directly from the eVestment survey or the ValueWalk article referenced at the beginning of this post.

Stop forcing investors to jump thru hoops just to get key documents like K-1’s & Capital Statements

When people talk about making investments in private funds, the last thing that comes to mind are physical pieces of paper.  And yet documents play as important a role in alternative investments as they do in publishing or any other industry.

Prospective investors are often made aware of private funds via documents like a fund prospectus, or other marketing documents.

Funds are formalized via subscription documents with investors, and they are managed via a variety of documents like Capital Statements, K-1 tax documents, and Capital Calls.

Despite the importance of these documents, the alternative investment industry is completely fragmented in how it handles the storage and distribution of key documents with its investors.  We talk to fund administrators, private banks, and fund managers all the time here at BaseVenture, and we rarely hear the same method being used twice.

The typical fund administrator, private bank, or fund manager stakeholder uses a mix of physical filing cabinets, digital folders on laptops, web portals, as well as a smattering of cloud storage providers to manage and distribute documents to their investors.  This quickly becomes a complicated puzzle to solve, because stakeholders need to be able to recall which avenue they used for a specific document, and then remember how to get to that document.

Additionally, these documents are typically standalone, meaning that they aren’t integrated or connected in any way with other key documents.  This results in documents that don’t provide any additional level of intelligence to help make them become (re)usable in other areas in the process of managing a fund.

The situation is actually worse for the most important “stakeholder” there is – the investor!  The investor might be required to receive documents via several different avenues.  A subscription document might come via overnight courier, whereas a Capital Statement might come via a web portal, and a marketing document might come via an email.

There is typically no uniformity used across document types, and the investor is often left to their own devices to respond as necessary to the document no matter which avenue was used to get it to them.  This typically involves numerous logins with multiple usernames and passwords across web portals, encrypted emails, and cloud storage providers.

Our aim at BaseVenture is to radically streamline and simplify critically important operational processes such as this one.  Storing and distributing important alternative investment documents should not be this complicated.  Our offering unifies all documents onto one platform, and importantly, gives the investor a single
method to access and act upon any key document for the private fund.

We start by giving the fund administrator, private bank, and fund manager a secure document vault where they can easily upload and store key documents.  Unlike electronic laptop folders, or the usual cloud storage providers, our document vault was built specifically for the alternative investment industry.

This means that everything about the experience of uploading and storing documents is completely designed to prompt for relevant factors for the fund administrator, private bank, and fund manager.  Our vault includes robust tagging and taxonomy that accounts for named documents like Capital Statements, K-1 tax forms, and more.

This tagging truly turns a document into useful data, whereby powerful filtering and grouping can be done across document type, investor, entity, time periods, and more.  Equally as important, because these documents are now data, they add a level of intelligence that can be applied to other key areas, such as pre-populating new documents, and enhancing reporting.

Sharing and accessing these documents by any stakeholder involved is extremely simple.  A flexible permission system enables access to users as defined by the appropriate stakeholders.  So, a fund manager can enable access for an investor to only those documents that are for that specific investor, while a fund administrator or private bank can enable access for fund managers and/or other service provider partners to documents pertaining only to those investors that belong to that specific fund manager.

Sharing a document by any stakeholder is done in a single manner – simply click on the “share” button and complete the step.  And of course documents don’t have to be confined only to be viewed online, they can be downloaded and printed anytime as well.

Importantly, security is also much more robust.  Rather than relying on unsecure email Inboxes, etc., we employ the same security in our platform that is seen in other mainstream applications like mobile banking.  The user has one username/password combination to remember, or we can integrate with the existing login process that a fund administrator, private bank, or fund manager utilizes for its investors.  Documents that are uploaded are protected within the secure vault.

Here at BaseVenture we are all about helping simplify the lives of fund administrators, private banks, and fund managers by reducing the time that they spend on operations so that they can spend more time generating growth.

We believe that it’s time to give all the stakeholders involved in the private fund industry – be they fund administrators, private banks, fund managers, and especially investors, the freedom to stop dumpster diving in their email Inboxes, filing cabinets, and typical storage providers to handle document upload and distribution.

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.

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Private Fund Managers & the operational struggle to raise capital

Here at BaseVenture we talk to fund managers regularly about the areas that they struggle with as they go about their daily jobs.

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 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.

Our 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.

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* DarcMatter: “Challenges Hedge Funds Face When Raising Capital” May 12, 2015.

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