Managing investor workflows shouldn’t feel like a maze. But when your CRM, document management, and compliance tools don’t talk to each other, it creates extra work, slows down closing, and frustrates LPs.
Join Tim Flannery, CEO and Co-Founder at Passthrough, and Mike Tracy, Senior Partner at Alpha Alternatives, as they discuss why fund structures and investor workflows are more complex than ever, the hidden costs of disconnected tools—and how to eliminate them, what LPs expect from a seamless onboarding experience and practical steps to integrate your systems without the headache.
Watch the full video below and read on for a summary recap.
Tim Flannery
Okay. Good afternoon, everybody. Nice to see you.
All right, well, while we're, while folks are come on, coming in right now, um, Mike and I have a bunch to cover today. Before we run through intros, before we start running through topics. I just wanted to have folks put in into chat, or if you want to send something directly to the moderators, what are the most challenging things that you're seeing from a fundraising perspective today that's not related to the macro environment? So really from a process standpoint, from an efficiency standpoint, what are the biggest things that you're running into? We'll make sure to cover it as we are. Going through this today. We've got a number of topics to hit, but would love to make sure that we incorporate your feedback and what matters to you.
And then also, if you have questions, we're going to handle questions at the end, but get them in throughout, and we'll tackle them as we, as we go, or we'll save them at the end. Depends if it's relevant to the topic we're discussing at the moment. With that, I'm going to go through and, again, my name is Tim.
I'm one of the Co-Founders and CEO of Passthrough. Passthrough automates fund workflows. We offer electronic subscription agreements and KYC/AML. We build customized workflows to your underlying sub docs. We also can collect all of your different documentation for your investors down to the underlying beneficial owners.
And we even have a managed service team that can help you assess risk initially, but then do it on an ongoing basis. In fact, late last year, we actually launched a, a new offering a new compliance offering for 31 CFR compliance. And if you don't know what that means, you're going to know what it means very well by the end of the year, because the SEC and FinCEN have mandated that groups that use the VC exemption (ERAs) and Registered Investment Advisors (RIAs).
Now having a lot of new obligations that apply to every investor that you have that's tied to a fund that's active. And so get ready for retroactive screening. So Passthrough, we work with about 700 GPs today. Those GPs are all over the world. We also plug into a whole bunch of systems which I think is going to be a fun part of the conversation today.
And I'm joined by Mike, Mike Tracy over at Alpha Alternatives. I'll let Mike introduce himself and Alpha Alternatives.
Mike Tracy
Thanks so much, Tim, really, really great to be here with you today. I really appreciate the time and everybody joining and appreciate the invite from from Passthrough. It's great. Great partnership.
We have a little bit of background. I'm a Senior Partner at Alpha Alternatives based out of the New York area. I run our front office practice for North America, covering kind of all things origination of the deal through close origination of investor through close, and then all the post-close monitorings of those deals and investors, through a lot of areas of technology operations, data strategy and advisory.
Alpha Alternatives for those that don't know is a consulting firm that's globally focused on the private markets industry and all things private markets from a sense of front, middle and back office, as well as the kind of enterprise strategy, whether it's data technology operations, consulting all over the ecosystem and tech stack as well as the ability to kind of support you know, a lot of other areas within the industry.
So this has been a hot topic for our industry, our client base, our team internally, spend a ton of time on this over the past you know, couple of years, especially over the past year, where it's really taken off. So, really excited to share some perspectives, what we're hearing, how we're, how we're helping folks and where, where some of the potentially areas of focus for risk are.
Tim Flannery
All right, thank you, Mike. And today we are going to walk through a number of different topics. We're going to talk about why is this actually an issue? That is coming up now as opposed to something that came up 10 years ago, then we're going to talk a little bit about where are the inefficiencies felt today?
Where is the pain? Where are the problems? How is it actually manifesting? And then how are managers actually responding to this? When they're thinking about changing their processes, changing their systems. And when people do decide to go do that, how do they actually successfully implement those systems?
And how do they sometimes unsuccessfully attempt to implement them? And then finally, we'll talk about what's coming up next with the kinds of things that we're seeing in the future. So, what's changed in all of this and why is fundraising more difficult than it's been in the past? And so I'll start here, and then I'll turn it over to Mike to have him share his perspective.
But I, I think one of the big things about alts is if you look back at this industry, I mean starting in the 1980s is when we started to get some more sophistication here. We had groups like the Yale Endowment and David Swensen start to pioneer asset allocation into private equity and to alternatives generally, where previously it was people split between equity and bonds and it was pretty sleepy.
And there's a trend of when institutional investors do a thing, this Yale model that was so successful for them became the endowment model, which then every sophisticated long term asset allocator had adopted. And now 20 percent or so of institutional capital is allocated to privates. Well, then retail eventually begins to follow.
And so, there's so much wealth trapped in the retail channel. In 2028, Blue Owl thinks that there's going to be about 300 trillion in the retail space. And the retail space is currently allocated about 3 percent to alternatives. So, massively under-allocated. Compared to what the rest of the sophisticated investor base has been doing.
And so you're already seeing all of these firms take such major strides and to, either begin offering alternative products, groups like BlackRock and Vanguard, to figuring out how as traditional alts managers like, Apollo and Aries and Blackstone, how they can cultivate those channels. And when you start bringing in alternatives, and this isn't just the large guys, this is also, you have emerging managers who can take advantage of the new SEC ruling that came out yesterday saying they're not going to essentially making the investor accreditation process that much easier for people. Where retail starts to come is where you start to deal with volume and you also start to deal with investor protections. And so with volume, you're dealing with a client base.
That's not as used to, so these processes that can be really anachronistic and they can be really confusing people that do know what's going on. And so that means that, you know, retail and high net worth individuals might make up 5, 10, 20 percent of your fund’s AUM, but they can take up to 80 or 90 percent of your time.
And so you can't even admit investors into your fund today. If you're actually pursuing these kinds of strategies and you're moving outside of a small circle of institutional capital, you can't even get them on board, let alone service them afterwards. But besides that, from a processing standpoint, you also have all sorts of issues from a regulatory standpoint too.
And so this is where consumer protections start to come in. And so we saw this a little bit with the SEC and greenwashing a number of years ago, but it starts to take a look like the regulatory authorities want to make sure that people are not being taken advantage of the place where this is now being felt really clearly is on the AML side and on the making sure there's no money laundering and terrorist financing that's happening.
And so that's come into pretty prime focus and essentially, all of this volume, whether it's volume from institutional capital that continues to pour more and more into it, or it's volume from retail is creating so much pain that we're seeing fund managers need to go adopt law firms don't even have the capacity to be able to go handle the kind of work that they'd like to just because everybody's trapped trying to go get documents corrected, trying to go get CRMs updated, getting systems to go talk to each other. And so, I think we've just reached a pain threshold that's too much. And now you're seeing investors that are turning away opportunities they'd like to invest in simply because the process is too difficult.
And so from our perspective, that's where we've really seen it get more difficult. But Mike, I'd love to, I'd love to hear your thoughts.
Mike Tracy
Yeah, definitely. I mean, I totally agree with everything you've said. I think in terms of complexities definitely would add, um, onto that the overall kind of, I would say, create creativity in market from a structural perspective, um, is also kind of adding a nuance there where, you know, I think a lot of the GPs and market want to be as accommodating to their investor base as possible to create vehicles and structures and overall investment vehicles that can be very strategic and nuanced and specialized that.
Their differentiator will be kind of, you know, seen by that market and ultimately, you know, a competitive edge which ultimately then leads to more complexity from an operational process perspective, which is, you know, not, not super scalable at the end of the day, probably take like a step back and, you know, I'll probably look at it from more of a technology process scale lens as well. Just because that's where I've spent a lot of my career. And if try to dumb this down a little bit, um, you know, we've always, we all have a mechanism for getting into some sort of portal that you're, whether it's your banking portal or your investment portal, your chases, fidelity swaps of the world, where you're very, very vanguards where you're fairly seamless in terms of getting an account logging in, you know, having all the straight through processes of information being set up, being able to deploy capital into it pretty quickly and start trading in a liquid environment or being able to access all your accounts in one singular spot.
We're all pretty used to that. It's been ingrained and embedded into our mindset for a number of years now, decades, and conversely, the kind of dichotomy here is. That problem statement has persisted significantly from an investor's perspective, um, for also decades and it's still not quite there.
It's definitely getting better in terms of the overall kind of impact that technology has had to. Turn that private markets kind of, you know, experience for the investor into a more seamless and innovative, and I would say more expected experience as well. Um, do you point around the, the retail environment coming into play very significantly in the future is very related to this as that environment is used to a modern you know, kind of experience an efficient experience, you know, simple things like having your information, your name, your address being saved from the last time you invested with a platform, being able to be repopulated, simple stuff like that, um, has, is, is table stakes, um, but even more simplistic is.
It's just the fact that the industry has been historically in an offline environment through PDFs, offline documents, print them, print them out, fill them out, return them, scan them, return them, someone mark them up, having to not be able to dynamically get through the kind of onboarding process in a more efficient way, having to kind of go back and forth over email, go back and forth over a potentially a workflow.
If you're on the leading edge here in the, you know, up to the past few years, that whole experience has been extremely cumbersome and challenging. You can imagine as we hit this inflection point of higher volume of retail investors deploying capital into the alts and private market space.
The complexity of structure in terms of structural vehicles and funds and, and entity alignment that you need to invest as an LP, the, the overall kind of, um, bifurcation and say, you know, opportunity to invest in a multi strategy environment within a singular platform. You know, I want to see how I'm doing across real estate, private equity, credit, VC portfolios that and funds that I've invested across singular manager that offers that. It's great they offer, but if I have to log into five different spots to obtain my information, then that certainly becomes pretty cumbersome. I'd also say that, you know, in the past, I think as long as those funds are performing, it's, you know, it's a pain. It's an expected pain.
It's an expected experience. We'll take care of it. And eat that pain, essentially, that mindset's gone, in my opinion, from what I've been hearing the ability to use this kind of synchronous technology environment and a singular workflow engine of straight-through processing of onboarding and fundraising ends up being a significant competitive edge and a brand differentiator.
For our clients, that's exactly what they're telling us, based on the research that we've done, that they've done, they know that if they can offer that type of experience to their LPs, they are getting more and more allocation, which is not rocket science, but it just hasn't been done in the past.
So it's great to see that kind of landscape shifted market occur. So, overall, we're in a really exciting time in terms of this. It's a disruption of the overall experience of an LP in private markets. We're really excited to see how this plays out with all the technology innovation that's coming to bear and what that ultimately means for the folks that are taking that seriously and deploying technology into that realm.
What, because the flexibility, the scalability, the differentiation, they're going to be offered is, it's going to be really exciting to see. So, a bit of what I've seen in the past and where, where, where we're at today.
Tim Flannery
So that kind of covers the broad, how did we get to here? What are the specific challenges that you're seeing IR teams, ops, finance, et cetera, face?
Like what, what are the things that are very near and dear and problematic. And you talked about LPs not being able to just reuse simple things like their legal entity names and their addresses. That one's pretty obvious, but where are the other things where there's real pain that's felt in the process?
Mike Tracy
Yeah, I mean, I think it's quite a bit around crafting that, that overall service model. that you want to deploy to your LP base. For IR teams, I know is a significant challenge. So you, what typically what we hear is we want to provide a top-notch service to our LPs onboarding into, into our ecosystem because we probably don't have.
The robust amount of tech that we need to kind of streamline this. And also we just want to show a really good face and come out with a really good brand experience for our LPs and effectively, to the extent we're able to handhold them through the process. So they feel very special. They feel like they're being taken care of. They feel like they're being able to have their questions answered really, really quickly.
And they're not waiting and waiting and waiting and getting delayed and getting frustrated. That's great. But in terms of the ability to scale that across the growing investor base and a growing, you know, kind of multi-strategy environment is extremely challenging, especially in a fundraising period.
And a lot of our clients are just fundraising all the time. So that's an all the time problem across all the different strategies. So that ultimately, almost like the operating model, that service model has become a really big challenge and that they often go back to relying on, you know, kind of offline processes, a lot of email, a lot of email back and forth, a lot of documents being taken out of a digital environment and, you know, worked with and manipulated and shared back and, you know, limited kind of optimization and workflow, limited kind of scale in terms of that service model. And I think that we also see a bit of challenges. Some of the folks that have tried that kind of outsourced, you know, investor servicing optionality as well.
There's a bit, there's great benefits to that to a certain extent, but then also you have to. If you're kind of distilling down this, this extremely high touch brand experience that you want to present to the industry and to your existing LP base and the broader industry, the folks that you're employing to be your service provider on the investment operations or investment services side of things, they also have to embody that brand and it.
I think without having them in your four walls, if you will, it's tough to maintain that, that sense of duty to the investor base. And overall kind of mindset that you've established for your many years being there, just kind of in the industry, knowing what it takes to be really good at this. It can be done for sure.
But it's certainly a challenge too, because it's usually, you know, not someone that's living, breathing, eating your organization, your brand experience, your day in the life of your investor. They're supporting you in a lot of ways. So crafting that, that operating model is extremely important.
Like I said, it can be done. You can find scale on that. But you also have to be really thoughtful about how you're distilling that brand. An overall kind of delivery model and white glove service to your LPs as well.
Tim Flannery
Yeah. What I heard from you was that there is a process thing that has to happen, but the thing that can get lost in it sometimes is a culture thing too, where your team has an experience that you want to deliver for your LPs, how you want to be able to go show them new products, new opportunities.
And that's really difficult to actually outsource and your processes can get you so far. And so you have to think about where are the ways you can scale. And so it tends to be places that are in technology. Yeah, the places where it, I think from our end thematically, there’s three things for raise efficiency.
One is around data. And so there's so much overlapping data that sits in your CRM. sits in your general ledger, sits in your investor portal, sits in your onboarding process. And so simply carrying that information from one place to the next is really problematic. And anytime you've got a human who's doing something, it doesn't matter if they're doing bulk downloads, bulk uploads, somebody who's going to fat bank or something somewhere, it doesn't matter how good your team is.
It's just the law of large numbers here. And so number one is that there's data that it's just difficult to actually move from one thing to the next. The second thing that we see is integrated workflows. So in a process, you've got something where somebody says when a happens, I do be the difference between that, and when something happens in Salesforce, it automatically triggers the thing that I need to go do in some other system is night and day, because again, you're not relying on people to go do a thing. You're not relying on somebody to have to make sure the data entered is actually, is actually good. You just need to make sure that, you know, you're tracking something in Salesforce or DealCloud. That should then carry over to your investor onboarding or wherever it needs to go. And then ultimately be updated later on. So that way somebody doesn't drop the ball somewhere.
And the last thing that I've seen too is that a lot of the software experiences that have been built for people we've talked about this a little bit in the retail side is stuff that was built sometimes 10 years ago, sometimes longer, and where user experiences have gone from 10 years ago to now is really dramatic.
I mean, even the process of going out and trying to collect AML documentation on somebody like the typical experience for that is I'm going to go send you a PDF and then you're going to go give me something in a share file folder or a zip folder. And I hope you don't share it over email because it's really sensitive information.
That's really unsecure. It's just, it's so inefficient to be able to even understand, like the basic data structure of your investors. And so, those are really the three things that we see. We see there's problems with data, there's problems with how you can have actions happen and occur across systems, and there's even a simple thing of how do you get somebody to go answer the right information?
That's, that's where we've normally seen it.
Mike Tracy
100%. Completely agree.
Tim Flannery
Those are the problems. So when people are coming to Alpha Alternatives today, what are they actually trying to solve? What are they prioritizing, and how does that factor into, how you advise them on systems to select how to prioritize things, how to, et cetera.
Mike Tracy
Yeah, I mean, I think this is this has been shit. This also has shifted dramatically over the past year as well. Um, I think probably the past before a year ago, let's say, um, the question that we would often get is, hey, we need to, we need to. To get an investor portal, or we need to get a new investor portal.
We don't like ours currently. So can you help us kind of think through a system selection process and go out and evaluate vendors, which we absolutely can. We do that all the time. And we still are doing that today. And we have a very kind of robust framework for how we think about, um, documenting requirements, setting that kind of, operating model, establishing what the right data taxonomy is, how to think about the evaluation rubric that we want to put together and score these vendors against, as well as what's the right vendors and market. We have a really good perspective on, you know, kind of the long list and short list of vendors that operate, um, you know, in that realm, um, and then go through and execute that, through an RFP, score, demo, proof of concept, you know, kind of get to a selection, um, whole rigorous process for on that, that works really well.
I think the thing that's shifted and we're definitely getting some really traction on the past year is instead of that singular kind of piece of the puzzle of, hey, let's go select a portal. If you will, it's taking a step back and let's think about your. Investor experience as a whole, not just that end state of a portal, but what does it look like when you first have a contact with an investor or a prospect through, either their existing process, their existing investor, or a net new prospect, and what does that journey look like from day one, all the way through close and what do you want it to look like, because I guarantee that, you know, there's very few, you know, folks out there that, that what they actually want that vision to look like in the future state looks like where it's at today. And I think that this is now a really good time to start to ask those types of questions to yourselves of what does that, you know, 5 year, 10 year vision look like for our overall experience, because I think we all agree.
It's probably going to change quite a bit over the next 5 years. Probably going to change quite a bit in the next 10 years, but it's worth taking a look at this moment, just because of the opportunity to build that foundational foundation aspect of what really good data looks like for your investors.
What really good kind of, you know, end to end integrations look like what's that day in the life look like for a prospect or an existing investor that's getting on board all the way through close. So, we're taking a lot of our clients through that initial kind of exercise of, you know, let's all get aligned on what that end state might look like and what what what you think is really good, what you think is probably attainable now and hopefully we meet somewhere in the middle.
For where you want to be from a system selection perspective, because we what have found because, is if you just go and could do that like singular portal selection, it's potentially limiting to what the overall kind of atmosphere and ecosystem looks like for that, that investor experience.
There's plenty of opportunities to, you know, either build something or go buy something that can hold your documents, you know, hold your capital calls, distributions, your cap statements, your PPMs, whatever it may be that you need, and data rooms and portals. But to me, the opportunity is now to kind of think about that synchronous step, various steps in the process from, you know, initial contact.
You know, deploying data rooms, deploying, you know, kind of onboarding documents, subscription documents, et cetera, documents and having that whole synchronous process be thought through. Well, not just from an opportunity to present this really robust and kind of transformational experience for the investor, but also to think through how you're going to optimize each of those processes internally so that you can get really sharp, crisp, and efficient.
On the overall onboarding and fundraising process, because when you're going through that exercise of transformation through a portal or the overall context that it's a really good opportunity to think through how you can make everything better, how you can make all the processes better, um, through efficiency, through optimization, through kind of scale, scalability, And in burst capacity support that you're bringing on from partners, et cetera.
So, that's kind of the differentiation that we've had in terms of, you know, the traditional system selection, which still, like I said, still happens all the time. But a lot of our clients are thinking through that, like, step back, what does this big vision look like? All right, great. How do we go select the right tools to support each of those? And ultimately, how do they stitch together from a tech architecture, data flow, a change management, new, new, new life of the IR professional, new life of the kind of finance, professional supporting IR, as well as the LP.
Tim Flannery
So one thing that some people like having, one vendor and there are having one vendor is easier than having multiple vendors because you're managing one relationship.
You've got one account manager, you've got one. How do you talk to clients about the trade offs between platforms that do a lot of different things versus platforms that focus.
Mike Tracy
Yeah, it's a really good question, but like one of the age old questions in the market. I think there is definitely always an opportunity to kind of, get focused on a platform, if you will, that is going to cover a lot of ground, um, in terms of capabilities and functionalities, you want to make sure that you are ring fencing those functionalities that you want that platform to cover. And making sure that they're doing it to the best of their ability.
That's going to suit your needs and you're not going to get significant deprecation of a certain kind of capability or functionality. A lot of times we see a lot of our clients get pretty comfortable with the best of breed point solution model too. And that is, I think also probably changed in the past handful of years, mainly because, if you don't have a capability to integrate through APIs, data delivery, you know, mechanisms really kind of, I would say low, low barrier to entry data pipelines, you're probably behind the eight ball in terms of innovation and tech.
So, um, because that's been just a standard of technology requirement in all of these point solutions now. The opportunity to integrate those solutions from one to the next and ultimately to a data and platform environment, that barrier to entry is significantly lower now as well. So, instead of kind of managing these super complex SOAP APIs and FTP, you know, processing mechanisms that we all had to deal with, you know, 5 to 10 years ago, um, it's much more synchronous, it's much lower, kind of pressure on the technology team to build custom solutions to integrate all this stuff together.
It's much more innovative. The monitoring of all those, those pipelines is much healthier. And ultimately if you don't kind of, you know, like one of those systems, those point solutions that you've identified, the switching costs are also kind of down quite a bit as well because of that. So, yeah, I think it's, you know, it's usually a cultural preference within your organization. If you want one thing to do something really well, then like really well, then probably you want to go in that point solution route. If you want the platform to cover broad set. You don't want a lot of vendor experiences to deal with again.
A lot of times it's a cultural thing. Then there's platforms that exist as well, but some of those platforms do. You know, three, four things really, really well, um, you don't want to try to force that fifth thing in there and, you know, it's okay to look for that point solution to support that.
Tim Flannery
Perfect. All right.
So you find something, you choose a vendor, you choose vendors, um. How do you make sure that you actually implement this thing correctly? And where do people go wrong?
Mike Tracy
Yeah, so I'll start off by saying that these implementations are often some of the most sensitive. You're dealing with, you know, an external environment. You're not kind of, you're dealing with your customer base, your client base, your investors. The last thing you want to do is really have a poor experience for them on implementation. The last thing you want to do is give them the wrong data, that's a really poor outcome for any number of reasons that, you know, you could bring up, you don't want to give them the wrong documents. You don't want them to have a bad experience with their logging in. And there's just a lot more external stakeholders to manage, and that are highly sensitive and the overall kind of, I would say, care to make sure all those things are still in place really well is, is probably one of the most critical things of the whole implementation.
So starting there, it's probably a bit different than, you know, a typical kind of internal business application implementation that you're, you're going through. I think that there's, and so tied in with that is a lot of kind of care around the validation aspect of data, care that validation aspect of any documents that you're supporting.
We always kind of try to tackle those topics really early on here. Of what's going to make sure that we have this, the right framework for, for validation of all those data points and documents that we're migrating into any new investor-facing environment, we probably need to add 2, 3 more levels of controls than we typically do on anything else just because of how sensitive it is.
So that's going to set the stage of how we try to think about it, how we make sure that we get our clients really, really comfortable with us and our approach doing it. In addition to that, there is an enormous amount of change management that needs to occur early and often. Making sure that our stakeholders, both internally and externally, have a robust plan for how, how their life's going to change, essentially, and their day-to-day, where you're really kind of, I would say, robustly mapping out where you're at today and where you want to be in the future with this, with new technology in play and ultimately, how are you going to get there from a training perspective, change of process perspective, communication perspective.
So oftentimes we are kind of, mapping out this communication plan in a pretty robust fashion of when we are going to be reaching out to the investors and LPs and all the external parties that are involved, letting them know that this is all happening, offering up the right training environments, the right kind of hand holding exercise, the hyper care. Of, you know, real time support, not getting back to you in 48 hours or 72 hours, but no, like 10 minutes. We're here. Let's make sure you have a really good experience and this, um, that whole kind of change management aspect is, is really important as I mentioned, and we want to set that stage that it needs to be deployed almost day one and then be a living, breathing work stream throughout the rest of the, the, the engagement all the way to go live and beyond.
Honestly, I think the other thing to make sure of is you have the right kind of thought and care around milestones. You know, when it comes to something like a portal or investor facing, you know, piece of technology, the last thing you want to do is be this extremely long drawn out experience that doesn't deliver any kind of, you know, incremental value to the investors or the internal folks until the end.
So how are you going to break up the milestones and approaches to make sure that those folks Incrementally are getting that value additive experience. And a lot of times it's, you know, creating, you know, whether it be the various fun groupings, whether it be various strategy groupings that you're going to on board various regions that you're going to on board first.
And probably for a period of time, they might be operating on two different environments, because if they're an investor in, in equity, but they also this credit strategy and credits not done yet, they might be still going on that, that the two portal experience, the two platform experience, um, as long as you are keeping that change management work stream really healthy and letting them know that this is going to happen, and it's going to be a quick turnaround to get them onto the next one.
You know, over communicating, giving them that comfortability and alleviating any anxiety throughout ends up being a good experience for them. People just like to be clear. They like to have a proper kind of view of what the future holds. They don't like to be held, left in limbo about how it's going to happen in the future.
So, the other piece is, you know, we talked about data again, but I'll talk about it 1 more time. Um, what's the data environment going to look like? How's that data flow going to start from manufacturing that 1st data point all the way through the end? What's the governance model over top of that?
Where is it going to live at the end state? How are you going to access it for, um, enriching those platforms and for the future for better experiences for the investor, but also for better reporting internally and helping support that investor master, that client master that you need to build.
That data piece is certainly really important, really complex at times and needs to be, have a, needs to have like a really strong focus and level of care on it. So those are just a handful of things that are definitely important to us and how we kind of see them potentially go wrong if they're not taken care of.
Tim Flannery
Yeah, I liked the phrase “early and often,” like this is a place where it's almost, there's no such thing as over-communication. You just have to make sure all of the parties are on the same page. The only thing I'll add is just thinking about the parties that are involved, especially when you're looking at having multiple solutions.
Those groups need to be talking to each other as well. I mean, I know this when we have clients that are integrating different solutions, we need to be aware of what they're doing and what their other teams are doing so that we can best support them too. So, totally on the same page. All right, let's wrap up with what's coming next.
What are you seeing next?
Mike Tracy
Okay. I think in terms of innovation, we are seeing the very significant and fast need for a supportive technology experience for the retail space that also integrates into the alt's world. Just starting there that, you know, that's a whole new world. That's a whole new level of volume, whole new level of kind of transparency, regulatory scrutiny, data volume, all the above.
So, technology that is going to support that from an alternatives lens and start to think about how a private credit retailization fund is going to be deployed into a set of retail investors. That whole ecosystem of technology is, you know, further along in some spots. It's not that far along.
So what is that? What does that look like? How does that get built? How does that get deployed fast, faster than it is at the moment? Is one of the top things that we're seeing from a tech and innovation perspective. I tried to not say AI in the first one, because just to,so I waited for the second one, but, yeah, I'd be really curious to hear about how you guys are approaching this.
But this is 100 percent a game changer for this whole ecosystem of investor, you know, experience, investor communications, investor support. I would not be surprised and I would actually hope that there would be investor services agents that are deployed across the investor lifecycle workflow that are really helpful that are really kind of specific from a knowledge perspective in a workflow perspective, that are working together and optimizing this whole ecosystem of process that allows for IR teams to not have to outsource as much if they don't need to, if they, if they don't choose, if they're getting comfortable with this. I would be super shocked if this doesn't happen in the next, you know, 18 months, to be honest with you from a generative AI perspective.
The other things that I want to see happen that we're talking with some of our clients on is using large language models and generative AI to support the onboarding scoring or efficiency framework that we would kind of put into play a couple spotsthe overall kind of time to value in Q and a client reaches out.
With a question, how long are you returning that question? What's the artifact that you're returning? How is AI supporting that? We've had clients that, you know, have measured really long or onboarding. Processes isn't just how do we kind of figure this out? How do we optimize this? And they are definitely looking at generative and large language models to support the whole ecosystem.
So those are, you know, 2 quick ones that I wanted to highlight that are 18 months.
Tim Flannery
Cool. All right. Hopefully my Internet isn't totally crashing at the end of this. On the AI and LLM side. I mean, yeah, it's real. It's very real. Anybody who says it's not like this is actually this is not a flash in the pan thing.
It's totally changing the way that people work. In terms of how we see it impacting our business, what it does is it takes things that are managed service offerings that we do, and it turns it into things that are more client exposed technology. And so that means that they can move faster. That means they can, again, like anytime you have to rely a little bit less on people doing things and there's going to be fewer times you need to go handle a change request.
And so, the strategy that we have and that I'm seeing people from a service standpoint have is if we're going to go hire one more person, what would it look like if instead we just deployed LLMs to try to go solve this? And what you get is people that are just way more leveraged in their time, and that means that you can go handle much greater efficiency internally, while still maintaining that culture that we talked about earlier to kind of bring a full circle. And so, yeah, the LLM stuff is really big.
We also touched on the other thing, too, of investor experience. You know, people can go trade derivatives on their phone these days. They should be able to go interact with alternatives in a pretty familiar experience, a comfortable experience to, and it will impact people's ability to go raise if they can't.
And so I think that's another one. The last thing that I'll call out is, I think we're in the middle of this shift. The world before was, it was really difficult to choose a platform and then choose other solutions that could then work with it. And so instead, you were either in the platform or you were out of the platform and you were forced to make a lot of trade offs.
The way, Mike, that you described it earlier of, well, you know that, this group is really good at these three or four or five things, but there's this other thing. It's kind of like if you were going to go buy a computer, in the 80s, you'd be stuck buying the Apple or IBM or the whatever it is.
And it'd be their hardware, their software, their everything. And then all of a sudden the consumers gained power and guess what? You could go put Excel on a Macbook. And so there's something similar that's happening here in this space too. And so I think there's going to be a lot of out-of-the-box style integrations that people are very unfamiliar with in the alternative space.
I can tell you that's a place where we're definitely investing time. All right, that's a whole lot that we've just covered in the last 50 minutes. We do have some questions. Let's take a look at what we got. All right.
So we have one here from Michael Bradford. How do you see clients integrating with data rims?
I can give you our perspective and then Mike toss it over to you. So a couple different things. One is with Passthrough’s approach actually is that we fully embed our investor appearance into their platforms. So if you're taking a look at a deal in a fundraising portal somewhere, you can click a button that says invest as an investor.
And that doesn't mean you're sending a third party, you're not sending them to a third party website. The entire experience is all captured in one place. And so we think the really important thing here, and it's the reason why we just do investor onboarding, is that we can go power those platforms that offer data room and fundraising capabilities.
And they can do the thing that they're great at, which is facilitating marketing and we can do the thing that we're great at, which is getting sub docs done really quickly. And so in terms of integrating with data rooms, that's how we see it on the execution standpoint. I'll turn it over to Mike.
Mike Tracy
Yeah, I think it's pretty table stakes that that has to happen, right? I pretty much across the board. Now, I tease on my thread of as well. I think that there are some really cool opportunities to integrate generative AI capabilities of diagnostically and analyzing data rooms from an onboarding kind of fund, document analysis perspective as well as due diligence on LPs as well to be able to pull out kind of key terms analysis, you know, sensitivity and disclosures, obviously a lot of that to think about, but that'll be something that we certainly see is trying to, engage with data rooms, both from the LP into that GP's data room and also vice versa, getting a lot of documents back.
So, um, a lot of optimization opportunity there.
Tim Flannery
Okay, cool. Next up, so we talked a lot about efficiency. How should fund managers actually measure efficiency in their fundraise?
Mike Tracy
Yeah, I'm happy to take this. I would say there's some pretty easy metrics to start thinking about. And then there's probably some more granular mechanisms to evaluate this. I would say, number 1, it's, you know, from origination of kind of launch of the fundraising process all the way through final close, is obviously an important kind of time to think about, you know, how long that whole process is going to that number varies all over the market. I've heard some really large numbers in the past with clients that are maybe a little bit more large and cumbersome, um, taking 70, 80, 90 days to, to kind of fully onboard all their, their investors.
And then some folks that are, they're a little bit more nimble engaging with some technology, some digital onboarding, you know, technology, getting that down to less than 2 weeks for a similar size investor base. So I think that there's some very real efficient efficiencies to be gained and thought through about that process.
But another exercise we've done in the past is gone through each of the kind of phases and kind of key activities of the process of originating investor all the way through close, and determining the actual processing time, each 1 of those take with a lot of kind of modeling frameworks estimation, um, where we're getting really granular into.
You know, each of the kind of steps of the process in a workflow and seeing, you know, how realistic it will be to inject technology into various parts of those that are going to be a lot more cumbersome than others, a lot more kind of people heavy, a lot more kind of touch point heavy. And that kind of leads to another point of how.
Many times as a document or a step in the process touching various individuals and stakeholders, internally and externally, oftentimes it's an LP, it's a lawyer, it's probably could be a financial advisor on top of that. So, you know, 3, 4, 5 external touch points at a single step in the process, and then internally might be 2, 3, 4 folks as well kind of various reviews.
Next thing you know, you're kind of seeing a really significant human element injected into that, that step of the process, identifying those and kind of mapping those out a little bit more scientific way. And then figuring out how you can kind of optimize those through, you know, collaboration activities, you have singular platforms to operate in limiting those kind of, you know, touch points in general, handoff points to the best of your ability in a non efficient manner, meaning like just by emailing, emailing, emailing, back and forth.
But rather than a collaborative workspace, next thing you know, you're kind of streamlining that process quite a bit. So have done their various kind of frameworks and rubrics for that type of analysis.
Tim Flannery
Yeah, the only thing I'll add is that when we see this stuff, it's really tightly tied to the actual transaction process.
And so for us, it's, you know, how quickly can an investor get through an onboarding request? And so, you know, does it take them 20 minutes or does it take them 30 minutes? Well, why is it taking longer here? And then you can get down to the individual questions. Are there individual questions that people are getting wrong versus right?
And then you have an overall what's submitted in good order from the first time it's submitted to what has to go back through a change request? This is especially true in AML because the way that AML would work before is, you know, you'd have somebody provide 20 percent of what they needed to provide, and then you'd have to go back and forth three times while somebody was diagrading, diagramming org charts on a blackboard, which wasn't exactly long term successful strategy.
And so, for us, it really is, we can see the individual spots where people get things wrong, and so we can apply those best practices across clients. But it's also really powerful when you're within a client, or when we're working with clients that are within the same law firm because then we can just easily roll that stuff forward.
Okay, we'll call this the last one, and then I'll turn it over to Mike for any closing thoughts that he has and so this one is a ask their questions Is the product law fund managers to pre fill sub docs for LPs can pass sub doc responses be used for new funds? Yeah, Passthrough has universal profiles for investors.
We've got over 50,000 unique investors They can reuse their information across any fund that they invest in on Passthrough and so they can easily select any legal entity that they've invested with and just reapply it. If there's information that's sitting in your Salesforce, it's sitting in your deal cloud, it's sitting in your yep, you can use that stuff too.
Okay, so I'll turn it over to Mike then. Mike, any closing thoughts?
Mike Tracy
Covered a lot today, so I appreciate it. I thought it was really fruitful discussion. Really, I'd say we have a whole kind of large team that's focused on this topic. So spending quite a bit of time in the market, trying to help our clients kind of think through what this transformation and landscape shift in industry is looking like moving by the day, moving by the week, month, et cetera. It's really transformative and really exciting.
So yeah, definitely feel free to reach out to either of us to try to, you know, have additional conversations. We're super passionate about this topic and really appreciate everybody joining and taking, taking an hour, hour out of your day.
Tim Flannery
Perfect. Thank you, Mike, for joining us today. Hope you all found this to be a productive conversation. I know I learned something. I learned something every time I talked to Mike and the Alpha Alternatives team. So, thank you for joining us. Have a great day. See y'all.
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