Attracting investors to private deals requires a holistic approach that addresses their investment preferences, risk tolerance, and liquidity needs. By implementing these five strategies and incorporating actionable insights for each, Investment Advisors can effectively position private offerings as attractive investment opportunities in a competitive market environment.
1) Offer a Diverse Range of Investment Opportunities
Offering diverse investment opportunities allows investors to tailor their portfolios to their specific investment objectives, risk tolerance, and tax considerations. Each of the following investment types offers unique benefits and opportunities for investors to achieve their financial goals, broadening your offerings' appeal and attracting a diverse investor base.
Private Equity
Private equity investments involve acquiring ownership stakes in private companies. These investments offer the potential for high returns over the long term and opportunities for active involvement in company management and strategic decision-making. Investors are attracted to private equity for its potential to generate alpha and diversify their portfolios away from public market volatility.
Pre-Go Public / PIPEs (Private Investment in Public Equity)
Pre-Go Public investments allow investors to participate in private fundraising rounds before a company goes public through an Initial Public Offering (IPO). Similarly, PIPE transactions enable investors to purchase public company shares in a private placement. These investments offer access to companies with high growth potential and may provide opportunities for significant returns upon a successful public listing.
DST (Delaware Statutory Trust)
DST investments offer investors fractional ownership of institutional-grade real estate properties, such as apartment complexes, office buildings, and retail centers. These investments provide tax-advantaged income and potential appreciation through rental income and property value appreciation. DSTs appeal to investors seeking passive income, diversification, and tax-efficient wealth preservation.
QOZ (Qualified Opportunity Zone) Investments
QOZ investments involve investing capital gains in designated economically distressed communities to qualify for tax incentives. These investments offer potential tax deferral, reduced and eliminated capital gains and the possible appreciation of invested funds. QOZ investments attract investors seeking tax-efficient strategies and impact investing opportunities.
2) Support Investor Lifecycle Flexibility
Frequency of Capital Calls and Time Horizon for Returns
Flexibility in the investor lifecycle is a key differentiator. Communicating the frequency of capital calls and the expected time horizon for returns enables investors to plan their investment strategies accordingly. Offering options for flexible capital deployment and redemption timelines ensures that investors can align their investment commitments with their liquidity needs and financial goals.
Liquidity Support
Providing liquidity options demonstrates responsiveness to investors' evolving needs. Whether through secondary markets, redemption programs, or structured exit strategies, offering avenues for liquidity reassures investors of their ability to access funds when necessary. By accommodating liquidity preferences, you enhance investor confidence and attract those seeking both long-term growth opportunities and liquidity management.
3) Offer Varied Commissions for Financial Advisors
Commission Structures
Tailoring commission structures for financial advisors can incentivize them to promote your deals actively. Consider offering tiered commissions based on performance or asset allocation, aligning incentives with investor outcomes. By rewarding advisors for successful outcomes, you foster a mutually beneficial relationship that drives increased deal visibility and investor engagement.
DRIP and No-Fee Investment Options
Providing options such as Dividend Reinvestment Plans (DRIP) and supporting no-fee investments can broaden your investor base. DRIPs enable investors to reinvest dividends automatically, maximizing their investment returns. Supporting no-fee investments eliminates barriers to entry, making your deals accessible to a broader audience of investors and potential discretionary advisors.
4) Provide a Seamless Investment Process and Investor Portal
KYC and AML Compliance
Prioritize regulatory compliance by implementing robust Know Your Customer (KYC) and Anti-Money Laundering (AML) procedures. Streamline the onboarding process for investors by leveraging digital solutions like DealFlow Accounts for document collection and verification. Ensuring compliance with regulatory requirements instills confidence in investors and demonstrates your commitment to integrity and transparency.
Streamlined Subscription Documentation
Simplify the subscription process with user-friendly documentation and digital signature capabilities like K-Sign. Offering pre-filled forms and customizable templates reduces administrative burdens for investors, enhancing their overall experience. Minimizing paperwork and streamlining processes creates a frictionless path to investment, facilitating quicker decision-making and capital deployment.
Comprehensive Performance Reporting
Enhance transparency and investor engagement by providing real-time performance reporting within a user-friendly investor portal. Customizable dashboards and interactive tools enable investors to track the progress of their investments and make informed decisions. You foster trust and transparency by offering timely insights into portfolio performance and investment metrics, strengthening investor relationships.
5) Emphasize Portfolio Balancing Benefits
Diversification Advantages
Highlight the benefits of diversifying into private deals compared to traditional public portfolios. Showcase how private investments can provide unique risk-return profiles and low correlation to public markets, enhancing overall portfolio resilience. By illustrating the diversification benefits of private deals, you attract investors seeking to optimize their portfolio allocations and mitigate systemic risks.
Comparative Analysis
Provide a comparative analysis of private deal opportunities versus public market alternatives. Demonstrate how private investments offer access to exclusive opportunities, superior risk-adjusted returns, and potential tax advantages. By presenting a compelling case for portfolio diversification, you differentiate your offerings and position them as essential components of a well-balanced investment strategy.
