Digital Tips the Scales of Change in Private Equity (Finally!)

August 31, 2017


While private equity investment has been accelerating innovation, and hence digitization, of industries for years, PE itself has been relatively untouched by the digitization drive. Yet digital innovation is taking hold within private equity and to ignore its possibilities today is to put future success at risk – whether you’re a limited partner or a general partner.

Palico

PE Growth and Rising Competition Push Digital Change

As private equity investment continues to experience secular growth – and increasingly intense competition – driven by its credible promise of relatively high returns largely uncorrelated with listed markets, the adoption of digital and online processes in everything from fundraising to the back office is increasingly key to success. Interestingly, the move to 21st century tools within the private equity industry is intimately linked to greater calls for transparency, coming principally from limited partners. LP influence on their relationship with general partners has forced the latter to become more proactive and thorough in their reporting. In an annual EY survey looking at disruption in PE, the percentage of LPs listing reporting as one of the areas they were “most concerned with” after track record for fund manager selection, leapt more than four-fold year-on-year, rising to 45 percent of respondents from just 11 percent. GPs are clearly aware of LP expectations and are actively adopting more sophisticated, and ultimately cheaper, digital reporting processes to keep up with the demands of investors.

The Technology Needed for a Fraction of the Cost

Opportunity discovery is another aspect of PE that is digitizing, in the process becoming less costly and more efficient. Large numbers of limited partners want access to PE opportunities that span the globe and that cover an ever-growing range of specialties. Many of these investments would be out of LP reach without online marketplaces like Palico. General partners who want to win commitments, while diversifying and strengthening their investor base, all at lower cost than has traditionally been possible, are listing fundraisings in online marketplaces like Palico. Going digital is shifting from an option to a necessity.

As Change Accelerates, LPs and GPs Close Deals on Palico

When disruptive technology builds a solid foothold in an industry, change accelerates. Today, Palico’s digital marketplace for private equity fundraising, co-investments and secondaries unites over 3,000 limited partners from 1,900 firms with over 5,000 GPs, offering investment vehicles in everything from venture capital to buyouts to litigation finance. Using Palico, LPs and GPs from across the world are evaluating private equity opportunities on a daily basis and closing deals with each other weekly, more cheaply and efficiently than ever before.

"Palico’s marketplace is a particularly valuable means of discovery in an industry where traditional fundraising frequently falls short."

Tom Clausen, Capvent