One of the recent trends in the private markets is democratizing access to a larger number of investors and different investor types. Of course, data is critical to enabling investors to see the returns on their investment, and capturing data from private holdings is entirely different than collecting data from publicly traded holdings.
Georges Archibald, chief regional officer of Apex Group, says there's a lot of talk about data and data transparency but very little or nothing about data capture for the private markets.
He added that they're currently seeing a transformation in the way data is collected. Specifically, he talked about the infrastructure to collect data and how it's validated and normalized for investors.
"The starting point should be infrastructure," he explained. "We need to capture data earlier. How can we make it immutable and measurable? … We made investments in data capture. Here's a handful of examples. One, for instance, we invested in a company that's retransforming real estate technology."
How the Internet of Things is transforming real estate investments
Archibald said the company tied into the overall real estate infrastructure from an accounting perspective at the property and fund levels. For example, the company utilizes the Internet of Things by placing sensors on and in buildings. These sensors enable the tracking of things like traffic density at different times of the day, building usage, and water and electricity usage.
All of that data is then transformed into financial data that can then be used to value the property.
"By consequence, the data can be run in a more robust fashion," Archibald added. "In this case, it can be run faster and run with better and more efficient data because the data captured by the devices is objective, not subjective. It can feed systematically into the valuation model then is benchmarked over time.
When all that data is correlated with rents, the company can then determine the output of the building based on its population and density. All of this information can impact the valuation of the property and prove whether the overall asset value assumptions that were made are correct.
From an investing standpoint, all that data makes it clear whether investors are capturing any gains on their holdings in the property. The data also increases transparency for investors, making it easy for investors of all kinds to see the returns on their investment into a particular property.
Utilizing blockchain
Apex has also implemented a digital onboarding platform that's been connected to the blockchain through an investment in company tokens. This platform is designed to help open up access to global private market funds to non-institutional investors.
Apex is now one of few providers in the market that can provide technology through digital ledger technology and transfer agency on blockchain allowing fund interests to be transferred more seamlessly where jurisdiction allows. The platform enables managers of global private market funds to access a much wider array of qualified investors.
Apex partnered with Hamilton Lane and Sygnum Bank in developing the platform, creating a new digital share class of the Hamilton Lane GPA fund and a DLT registry to automate fund administration functions that were traditionally separate.
"What we have is that an investor can have a digital onboarding experience," Archibald added. "So our clients are typically fund managers… Those fund managers have underlying clients, and it's important for those managers to see a good client experience. If they don't have a good experience, they don't raise assets."
Apex Group wants to partner with fund managers to provide a good client experience. The firm also invested in a company that gave it capabilities in terms of investor onboarding to make it both digital and aligned to risk across different jurisdictions.
Archibald explained that current investor onboarding among fund managers is bespoke, so the experiences from one manager to the next are nothing alike. However, digitizing the experience is critical because it helps managers and investors see which documents have been collected, whether they're up to date or need to be updated, and which documents still need to be collected.
Digitizing the experience also helps investors see whether the risk category for a particular fund is appropriate for them.
"So it's a materially different way for us as a servicer to drive client experience by creating a data model," Archibald explained. "Not only is technology a key part, but it's also aligned to risk rating by jurisdiction for a certain type of investor."
Addressing the challenges of data collection
When asked about the challenges of collecting data, Archibald said he believes they are cultural and behavioral rather than related to technology. He said the technology is there, but part of enhancing the technology is the educational process, including bringing various stakeholders along the journey.
Another important point he brought up is managers understanding where they want to go. Archibald said it's important for managers to run a process that enables them and their team to understand which technological benefits are out there and how to deploy them into the organization.
"It could be the organization is ready for some of the changes or is very comfortable with the way they've operated in the past," he added. "Part of the job is to show organizations how to use new tools to make their processes more efficient, robust, and with better quality assurance from a qualitative perspective."
However, Archibald believes the number one challenge is organizational buy-in, including capturing engagement and then delivering progress.