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Joint venture

State Street and iCapital bring alternatives to private investors

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State Street Corporation and iCapital Network have launched a partnership designed to offer private market funds, such as private equity, private credit, real estate and infrastructure to high net worth investors.

State Street Corporation and iCapital Network have launched a partnership designed to offer private market funds, such as private equity, private credit, real estate and infrastructure to high net worth investors.

Historically these funds have been available to institutional investors only, but the firms comment that high net worth investors and family offices are increasingly seeking access and exposure to these alternative asset classes to achieve portfolio goals of diversification and income. 

This collaboration is designed to allow State Street’s alternative fund manager clients to simplify and accelerate the launch of registered private market products, establish scaled access to the wealth management channels, monitor fund raising activities, and utilise a comprehensive, fully searchable database of all their investor documents across all funds.

State Street’s Cesar Estrada, senior managing director with alternative investment solutions and Jennifer Tribush, global head of alternative product solutions and senior vice president at the firm say that the driver behind this partnership was a recognition at a macro level that all the benefits of alternatives and private markets investments have, until now, been primarily available to institutions.

Estrada says: “Private equity, real estate, infrastructure and hedge funds have by and large been held by institutional investors. This will change in the future.”

Estrada says that as clients start distributing these products to individual investors, State Street wants to be in the position of being able to service their needs, hence the joint offering with iCapital.

Starting in the US, the firm plans to offer these investments through 40 Act registered funds but it will bring this offering to Europe at some point.

Estrada says that the offering has been in place for this offering for some time but is only now being proactively extended to the market more broadly. “The way we are looking at it is that the individual investor in wealth management is going to be a big beneficiary in that what we are trying to solve here is the experience of that investor as they go through that lifecycle.”

Tribush says that there is agility in the model with iCapital and what it can offer wealth managers, coupled with State Street’s offering. “We are the number one leading alternative provider in the world,” she says. “I don’t think you can get that combination of scale and agility anywhere else.”
 
There are about 13 million individual investors who fall into the affluent segments, Estrade says, holding about USD16 trillion in investable assets but they have close to nothing investing in alternative investments at the moment.

“There lies the opportunity over the next three, five and 10 years,” he says.

This collaboration will allow State Street’s alternative fund manager clients to simplify and accelerate the launch of registered private market products, establish scaled access to the wealth management channels, monitor fund raising activities, and utilise a comprehensive, fully searchable database of all their investor documents across all funds.

“We’re delighted to be cementing our relationship with iCapital in order to support the needs of this growing distribution channel”, said Paul Fleming, global head of State Street’s Alternative Investment Solutions (AIS) group. “If the private markets were to capture just 5-10 percent of the affluent and mass affluent market in the US alone, it would represent between USD800 billion and USD1.6 trillion in assets under management.A strong partner with a solution that addresses the needs of the investor, fund manager and investment advisors and distributors is critical. That’s why we’re partnering with iCapital.”

“The opportunities of the private market have traditionally been unattainable for those that lack the scale of an institutional investor”, said Lawrence Calcano, chief executive officer at iCapital Network. “However, our technology is rapidly changing that with access, efficiency and transparency.  This partnership with State Street aims to create new opportunities for fund managers, advisors and high-net-worth investors by facilitating the offering of registered funds, providing managers access to fresh capital and giving investors an opportunity to add new asset classes to their portfolios.”

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