One of the major private banks has partnered with the financial technology firm to streamline how clients tap into alternative investments.

HSBC Global Private Banking, Americas has 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.

The move, seen as a way to bring in more high net worth clients to the iCapital platform, opens up a number of services, iCapital said. HSBC’s qualified clients and their investment counsellors will be able to allocate to private equity, private credit, and hedge fund investments. 

The deal enables clients to put in money far below existing industry minimums of $5 million or more, iCapital said.

“Our mission to democratize alternative investments is providing advisors and their qualified investors with a more complete toolkit as they seek to construct thoughtful portfolios,” Lawrence Calcano, iCapital’s chief executive, said.

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, have 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.

iCapital has noted that younger high net worth investors tend to be more positive about alternative investments than their older peers. 

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. The deal, as and when it closes, means that iCapital’s technology platform will service more than $25 billion in assets and nearly 70,000 investor accounts. In July last year, iCapital secured an investment from Morgan Stanley. This joined investments from UBS Financial Services and BlackRock.

Tie-ups and alliances in the alternatives space continue. For example, last September OppenheimerFunds and The Carlyle Group, the international private equity titan, formed a joint venture to provide global private credit opportunities for HNW investors and advisors primarily focused on the US market. That JV began operating at the start of this year.