iCapital Network Poll Shows RIA Clients Keen to Learn More About Private Equity

Jun 9 2016 | 11:01pm ET

Nearly 70% of registered investment advisors believe their wealthy clients are interested in private equity investments, according to a new survey by online private equity investment platform iCapital Network., although only about one-third have provided PE investments to their clients in the past five years and only 25% have actively raised the subject. 

“The surge in private wealth creation has directly influenced a trend toward more transparent, objective financial advice,” said Lawrence Calcano, managing partner of iCapital Network.  “As a result, the typical offering from RIAs is geared toward delivering holistic wealth management solutions to affluent investors and will continue to evolve based on the needs of the high-net-worth market.”

The data was collected from 443 RIAs, according to iCapital, and of those surveyed, more than 85% manage more than $250 million in client assets. More than half focus their practice on fewer than 100 high-net-worth clients, the company said – exactly the individual investor market segment believed to be the most interested in PE investments. 

Nearly 90% of the RIAs offering private equity said their clients invested between $1 million and $10 million in funds, or an average of approximately $5.2 million per high-net-worth client, iCapital’s survey showed. In almost all cases, the number of clients investing in private equity funds represents less than 10 percent of each advisor’s client base.

RIAs offer PE investments in two ways, the surveuy revealed, with nearly 60 percent of practitioners using private equity funds and more than 40 percent facilitating direct investments. About 15 percent of advisors help clients achieve exposure to the asset class through a combination of both approaches.

Direct investments were sourced differently, as well. Nearly 80% turned to friends and family to find opportunities., and about one-third relying on angel investor networks and syndicates for deal flow, which is typically focused on commercial real estate and small companies.

ICapital’s survey also sheds some light on the concerns of RIAs regarding the PE space.  

  • The biggest obstacle, as cited by more than eight out of 10 RIAs, is the lock-up period for private equity funds. Lock-ups can vary depending on the type of fund but may range from 4-5 years for a private credit fund to 12-13 years for a venture capital fund.
  • For about three-quarters of RIAs, the minimum investment required by most fund managers can be problematic, while about two-thirds said they lack more clients with the requisite wealth and time frame. 
  • Another six in 10 are impeded by their inability to access high-quality funds which have historically targeted institutional investors, while transparency is cited as an issue by roughly half of survey respondents. 
  • Interestingly, approximately four in 10 RIAs identify issues associated with their own level of familiarity surrounding the asset class, suggesting greater awareness and education about private equity would help. 

ICAP iCapital’s online platform offers a curated selection of alternative investments, including private equity, credit, real estate, venture capital and hedge funds, to its private network of registered investment advisors, broker-dealers, family offices and individual high-net-worth investors. The state-of-the-art platform was purpose-built to provide next-generation research, fund diligence and reporting tools, as well as enabling electronic fund subscriptions, redemptions, capital confirmations and statements.

The New York-based company was founded in 2013 by former Fir Tree executive Dan Vene and former Veronis Suhler Stevenson managing director Nick Veronis. It is among a new generation of alternative investment firms that utilize technology to open investment channels previously unavailable to wide swaths of the investing community. 

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