Private equity fundraising platform targets individual investors

Despite efforts by some asset managers such as Carlyle Group LP and KKR & Co LP to expand access to wealthy investors, private equity remains a restrictive asset class dominated primarily by institutional investors such as pension funds and insurance firms.

iCapital’s platform features more than 2,000 private funds in fundraising mode. It has been operating in a limited trial mode since last spring and says that is already being accessed by accredited investors that collectively have assets of more than $450 billion.

The company is backed by a consortium of firms that help source fund managers and include Evercore Partners Inc, Monument Group Inc, Capstone Partners LLC and Eaton Partners LLC, in addition to Blackstone’s Park Hill Group and Credit Suisse’s private fund group.

For a fee, fund managers can create their own profile on the platform. Investors, who iCapital screens to make sure are viewed as accredited by financial regulators, are offered the platform for free to find and compare funds against each other as well as performance benchmarks.

High net-worth individuals and family offices looking to invest in private equity have traditionally relied on banks such as JPMorgan Chase & Co and Wells Fargo & Co for access to private equity funds.

This is because private equity funds typically accept commitments of at least several million dollars. The banks act as wire houses that bundle together smaller commitments into feeder funds, which in turn invest in private equity funds.

iCapital argues this distribution model misses many registered investment advisors (RIAs).

“As a placement agent, even with the best-run marketing program, you might get to only a quarter to a third of the names that are out there in the marketplace,” said iCapital co-founder and chairman Phil Pool, a private equity fundraising veteran who co-founded Donaldson, Lufkin & Jenrette’s private fund group.

iCapital also argues that many traditional wire houses focus on the big funds, so RIAs miss out on opportunities to invest in smaller and less known fund managers that may have a strong track record.

“I have found that iCapital has brought me names of people fundraising I would not have come across otherwise,” said multi-family office Northeast Financial Consultants Inc president Elwood Davis, who has already been using the platform.

iCapital is also looking to offer its own feeder funds. Co-founder and managing partner Nick Veronis declined to publicly disclose the feeder funds’ fees, but said they would be less expensive than traditional wire houses.

“We believe iCapital’s feeder funds will provide access with a lower fee structure,” Veronis said. 

Greg Roumeliotis is a reporter for sister news service Reuters.