CoInvestor is making investment in alternative assets easier for fund managers, advisors and high-net-worth individuals.
Alternative assets are only going to become more important. In the past, few investors have been willing to bet on assets that do not fall into the stocks, bonds or certificate categories. The reason is that these assets have been difficult to evaluate as their liquidity has been troublesome to assess. To be successful, investors were required to have access to a wealth of information about them, which necessitated time-consuming and expensive manual labour. In short, alternative asset investments were risky and expensive business.
However, things are changing. Whilst investments in things such as residential rental real estate, art, wine and other unusual assets is still risky, an increasing number of financial advisers and investors are diversifying their portfolios with alternative assets. While around 5% of investment portfolios of the past used to be in alternative assets, Chris Sandfield, CEO of alternative asset marketplace CoInvestor, has seen that figure jump in some cases to between 20% and 30% of the total assets under management. And he believes investment in alternative assets is only going to become more commonplace as access increases.
That represents a huge opportunity for wealth managers as $14tn in assets are estimated to be under management by 2023, an increase from roughly $8.8tn in assets as of the end of 2017, according to research from Preqin. The growth is expected across all asset classes, both big and small.
Part of the reason is that a decade of financial market growth might be about to end. “The listed market has been on an incredibly long bull run but this is the end of the supercycle we’ve been in,” he says. “That is happening now because of COVID-19 acting as the catalyst, but it was very stretched anyway and people were looking at other ways to make their capital work and also to diversify their portfolio.”
As they are opting to diversify their portfolios, Sandfield is convinced that CoInvestor offers the perfect solution for them to do so. The London-headquartered WealthTech company was founded in 2016. Since then it has become a leading technology provider digitising the investment process and management of alternative assets such as EIS, SEIS, VCT, BR and private equity. To date, CoInvestor has over 11,000 advisers and $536m assets under administration. It’s flagship service, the CoInvestor platform, engages fund managers, investors and advisers – all in one place.
“It’s a simple idea,” Sandfield explains. “It creates a marketplace that connects what we understand to be the three sides of the market – the fund managers, the high-net-worth, sophisticated or elected professional investors, and their advisors. CoInvestor is quite simply connecting and creating a marketplace for those three participants to all operate in.”
Importantly, the company has simplified the process by automating a lot of the time-consuming and costly manual processes associated with alternative asset management. “Historically, this has been a paper driven business,” Sandfield explains. “It was very hard to understand what the market looked like, and very inefficient to try and invest. So, the original concept was to see if we could digitise that whole investment process.”
CoInvestor has standardised the information available for fund managers, investors and advisors, meaning they won’t have to deal with a lot of documents and forms needing to be signed and sent back and forth. This, Sandfield explains, means it is much easier for investors to get a clearer overview of the market and to more efficiently diversify their investments in alternative assets across multiple different funds and to manage them.
While many WealthTech companies have positioned themselves as solutions to democratise the market by opening up their solutions for people who are not high-net-worth individuals, that is not what CoInvestor is about. “We’re not lowering the barrier of entry,” Sandfield explains. “These types of products are only suitable for a certain type of investor.”
The reason for this is the fact that investing in alternative assets can be highly illiguid and still carries palpable risk, even with a lot of the manual paperwork stripped away. “If you’re a sophisticated or high-net-worth investor, then our platform is designed for you,” he continues. “We are working with some of some of the best and brightest fund managers to be able to create new opportunities and new investment products for that type of investor.”
Having said that, CoInvestor are also looking for other alternative investments and are working with fund manager to explore different ways of opening up other alternative investments to people where those doors have traditionally been closed.
That being the case, CoInvestor has made it easier for small investment firms to enter the alternative asset space. “It’s something I’m truly passionate and excited about,” Sandfield says. Particularly, he is excited to have seen CoInvestor create an environment where smaller investment management firms can get noticed on the platform, despite not having the biggest marketing budgets.
“I think that’s certainly been the biggest change that I’ve seen”, he says. “The barrier to entry for fund managers has come down and the government supported tax efficient model creates the liquidity into some of the brightest young companies that are out there. I’ve seen an influx of new entrants fund managers, which are very backable and, in my own opinion, highly investable.”
Looking ahead, the CoInvestor team has noticed an increasing demand for new alternative asset products. “We do feel quite strongly that with smart use of our inhouse technology we can create access to new products and that’s what we’re working on right now,” Sandfield says, adding that this is the plan for the next 18 months.
However, WealthTech is, just like any other industry, currently affected by the global coronavirus pandemic. So when Sandfield is asked where he thinks CoInvestor will be in the next year, he replies, “Based on the current market environment, we will be prudent in our cost management and highly supportive of all participants as we work through the current challenge and into an unknown global business environment. What is important is that our platform enables the marketplace to function, with or without a lockdown.”
Although, he adds that CoInvestor has several initiatives that it is currently working on. “We are a technology firm and we have built a platform that enables us to do things quickly and efficiently,” he says. “So we continue to explore new markets, new investment opportunities, different services that we can provide to the advisors, to the fund managers, and to the investors themselves. By providing value to all, we are working forever closer with all three sides of the market.”
Particularly, CoInvestor has started to work much closer with fund managers over the past 12 months and Sandfield is eager to continue to double down on its efforts to prove to fund managers how much they have to gain from working with CoInvestor. Sandfield is bullish about the company’s ability to reach those goals. “There’s a whole host of opportunities for us and there’s a whole global marketplace for technology,” he concludes. “So there’s lots of exciting things that we’re doing right now and even more exciting things we will be doing in the future.”
CoInvestor was recently named in the WealthTech100 2020 list, to check out the full WealthTech100 click here: WealthTech100.
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