Strategy

JP Morgan, Carlyle Make "Strategic" Investments Into Alternatives Network

Tom Burroughes, Group Editor, November 9, 2018

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Other strategic partners and investors for iCapital include BNY Mellon, Credit Suisse, Morgan Stanley Investment Management and UBS.

The largest US bank and a major private equity house – JP Morgan and Carlyle respectively – have made strategic investments into iCapital Network, the financial technology platform for alternative investments. 

Other strategic partners and investors for iCapital include BNY Mellon, Credit Suisse, Morgan Stanley Investment Management and UBS.

A month ago, HSBC Global Private Banking, Americas agreed with financial technology firm iCapital Network to speed up how clients can tap into alternative investments such as private equity at far lower minimums than now operate.

In May, JP Morgan Asset Management said it had agreed with iCapital to provide a white label offering exclusively for Registered Investment Advisors and their clients to access some of JP Morgan’s alternative investment strategies.

As far as Carlyle Group is concerned, it has also partnered with the network to use its proprietary technology to help manage Carlyle’s operations and administration of its private equity vehicles, and therefore target the wealth management space.

Such partnerships have been around for some time as certain banks and financial institutions use expertise and networks of existing organizations rather than go in-house. In 2014, to take one such example, MUFG Union Bank, NA, forged a strategic partnership with Guggenheim Investment Advisory, a business unit of Guggenheim Partners, to deliver alternative investment solutions to clients via the Guggenheim Alternatives Platform.

While there have been concerns about $1.0 trillion of “dry powder”, or un-called money, in the private capital industry (source: Preqin), there is strong interest in unlisted capital markets and relatively illiquid, alternative assets because their returns are perceived to be superior. A decade of ultra-low interest rates, among other forces, has propelled interest into areas such as private equity, infrastructure and forms of real estate. With hedge funds, however, results have remained relatively lackluster compared with some of the eye-catching returns of more than a decade ago.

These are busy times for iCapital. In September it acquired Bank of America’s alternative investment feeder fund operations businesses, which represents about $20 billion in client assets. The businesses provide sponsorship, administration and advisory services to alternative investment feeder funds. (See that story here.)

Such partnerships highlight how banks and wealth houses want different ways to source investments for their clients at a time when regulatory costs and changing client demands are shaking up distribution networks.

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