How Technology Needs Change as New Investors Enter the Private Markets

Expanded access to the private markets also comes at a critical time for fund managers, as institutional fundraising slows and concerns grow over delayed distribution payouts. And with $295 trillion assets under management globally,⁴ managers recognize that retail investors represent a vital source of fresh capital.

Understanding investors’ needs

The surge in interest brings a crucial need for technical and operational adjustments. As retail investors enter the scene, tools and platforms must evolve to support the seamless and personalized experience they now expect.

Enhancing user interfaces, improving onboarding processes, and providing robust customer support make a significant impact go a long way. Leveraging technology to offer near real-time portfolio insights and educational resources will also be essential to help meet the expectations of today's digitally savvy investors. Offering different flavors of investment products, such as facilitating access to pooled capital or secondary markets, is another way for managers to stand out.

Gaining a clear entry path to the private markets will position individual investors to tap into companies’ growth potential. However, marketing to new investors goes beyond simply providing access. Individuals enter the private markets with different liquidity needs, expectations for more transparency, and often a requirement for more education about investment timeframes, fees, and risks.

Managers must be ready to tailor their communication strategies, offer comprehensive educational materials, and ensure transparency in reporting and fee structures.

Building trust through open communication and education will be key to attracting and retaining retail investors in the private markets. Fund managers must also weigh the unique preferences and behaviors of retail investors, such as their tendency to make decisions based on emotions or a gut feeling. Vanguard research conducted in 2020 found that factors such as trust, personal connection, and proactive outreach contribute to roughly 40% of how an investor views the advice they receive from a trusted financial advisor.⁵

The ability to craft compelling narratives around investments and highlight the impact of private market investments on real-world outcomes will resonate with individual investors. Whether it’s adding more business development and investor relations professionals ready to build strong relationships with retail investors, expanding your product suite, or offering more liquid investment products and structures, private markets firms must be ready to position their business for a different class of investors.

Ebook: The Retailization of the Private Markets

What changes in a new age of investing

As investors enter the arena, there is an urgent need for technological solutions that cater to their unique requirements.

• Education

Resources integrated into website landing pages, platforms, and reports help break down complex financial concepts and investments strategies into understandable terms, fostering confidence in investment strategies and positioning managers as trusted partners. By providing comprehensive and reliable educational materials, investment managers can position themselves as trusted partners, equipping investors with the knowledge and confidence to make informed investment decisions that align with their financial goals and risk tolerance.

• User experience

The complexities and opaque nature of private markets can be overwhleming. Features like self-service tools, simple navigation, and a view tailored to an investor’s goals and risk tolerance will help managers produce reports and gather data that resonates with their investors’ unique needs. A strong user experience also helps managers position their firm and products — such as tokenized real-world assets or funds that facilitate liquidity — as market leaders.

• Data

As more retail investors enter the market — and institutional capital flows continue — data volumes will grow exponentially. To handle this surge, data infrastructure must be designed to ingest, validate, harmonize, and distribute information. Your system’s ability to synchronize data to support analytics and personalized insights will quickly become an essential requirement.

• Security

With the rise of retail investors, the volume of sensitive information increases, making security protocols critical. Advanced encryption, secure data storage, and comprehensive user authentication mechanisms are essential to safeguard investor information and transactions.

• Reporting

Transparency and trust are paramount for any investor entering a new asset class. Retail investors, used to near-instant data access in public markets, will expect the same level of transparency in private markets — and so will regulators. Sophisticated tools pull information from synchronized data to rapidly ingest and present details. Streamlined report generation and distribution, combined with self-service tools, can save time, reduce errors, and optimize operations, making the investment process more efficient and user-friendly for both investors and managers.

• Analytics

Data analysis lets you form the “so what” of everything you do, helping you and your investors continually monitor and evaluate performance. Strong analytics not only help investors track their progress but also enable you to adjust strategies as needed to optimize returns. What’s more, regular performance updates build transparency and foster a stronger relationship with investors. Analytics that pull data from a unified source of information let you know the information you give to investors is accurate and includes the tailor-built investment and risk insights they expect — and need.

Technology must adapt to investors’ needs

Technology-forward firms are not just thinking about fundraising and capital deployment; they’re also thinking about how infrastructure, unified data, and analytics enable them to support their clients.

As the retailization of private markets gains momentum, technological infrastructure must evolve. The growing influx of retail investors, many unfamiliar with the complexities of private investments, necessitates a shift toward more accessible platforms. Tools able to support product liquidity, help educate and build strong relationships with investors, create transparency, and meet regulatory obligations will distinguish themselves.

Keep reading to learn actionable ways to empower and build trust with your investors.