The private markets industry, with over $13 trillion in assets under management expected in 2020 according to PwC, operates under the same infrastructure established more than 30 years ago. Private markets investments, such as Private Equity and Venture Capital, lack strict reporting standards by private market investment managers, allowing discrepant and convoluted performance reporting. Investors in the private markets investment funds, Limited Partners (LPs), are often subject to long-term holding periods of their capital, garnering the classification of an illiquid market. LPs can rarely exit their private market investment positions unless the investment managers, General Partners (GPs), achieve a liquidity event. These two aspects of the industry stymie the market from advancement, but can be addressed with innovative Artificial Intelligence (AI) technology. Equitir, an Israeli AI startup, is planning to uproot the antiquated infrastructure of the alternative private markets with the use of machine learning to help LPs invest with more transparency and liquidity.
Equitir is developing a marketplace platform for primary and secondary alternative investments through machine learning automation. Their platform is designed for LPs to accurately evaluate the performance of any GP historical performance, as well as allow the sale of investment position to other LPs.
The startup was founded in 2019 by Alon Hirsch, Elad Kehat and Dr. Rafi Gidron, the second venture of the team. Hirsch and Gidron were co-founders of RondinX (acquired, 2017) that focused on the prediction of bacterial growth dynamics into microbiome analysis. Kehat was RondinX’ CTO and first employee.
Hirsch developed the concept that as an investor, the use of structured data in alternative investment decision making could be a competitive advantage and strongly influence the success of investment efforts. Knowing which funds outperform others is key to investing, but understanding that very notion is complex. Why? Reporting standards for private markets is convoluted and obscure for any investor. Funds can present their performance data in any fashion, and change it annually. One industry investment management incumbent, Hamilton Lane provides innovative private markets solutions to sophisticated investors around the world. Their solutions like Ipreo and Cobalt attempt to bridge these gaps, but true automation remains to be seen.
Equitir is leveraging AI technologies to extract data from any source, such as email, PDF, or investor relations’ websites, and structure it. “Every GP reports how they want, which creates complexity to run proper analysis” explained Hirsch. “Due to the fact that we can extract data and structure it, we structure it according to GAAP.”
“The challenge we face is the automation of extracting data from semi-structured documents” explained Kehat. “The financial reports of alternative investments don’t have a single standard, and every GP reports their performance differently, forcing LPs to structure the unstructured data.”
Equitir’s technology is designed to complete analysts’ work by extracting data accurately from those documents using machine learning based data programming, built off of a data lake of filings from many investment funds.
They’re innovating the market on both their application and the pricing model. As the data is structured, Equitir also creates OTC protocols that can be used in a marketplace. No need for a long and expensive transaction process, where brokers, such as Hamilton Lane, charge 3-5%.
The startup’s unique marketplace platform coalesces the primary and secondary securities of the private alternative markets.
“By structuring data, we create de-facto standards and protocols. No a-priori market players’ cooperation is required” explained Hirsch.
And with the market’s assets under management expected to grow by 59% over the next five years according to Preqin, and M&A activity heating up (eFront acquired by Blackrock for $1.3 billion), Equitir is positioning itself to disrupt the future of alternative investments.
Equitir intends to become the world’s biggest repository of data on alternative investments performance, creating transparency and making valuable information and insights available to its clients.