These actors are operating online marketplace platforms that look and feel in some aspects like equity-based crowdfunding sites but with far larger ticket value deals - often in the $50m-$100m range - and they benefit from the greater transparency and efficiency brought by systematizing and moving their compliance and investment processes online.
Accordingly, the first way in which pension funds are participating in Alternative Finance is that pension fund managers are starting to play a role as institutional investors in these platforms. Crowd Valley customers who identify themselves as Broker-Dealers, Private Equity firms or Venture Capital firms, for example, often work with pension funds either directly or indirectly through advisory groups. These institutional investors often do not have the same kind of open, 'social' profiles as smaller individual investors, but they follow very similar processes in order to express interest in an investment, conduct their due diligence, and complete their paperwork online.
Second, in some countries, pension funds are being used as a tool for company directors to generate additional working capital. For example, Pension-Led Funding (PLF) is a product offered in the UK that allows business owners or directors to use their accrued pension pots to release capital into their business.
As reported in ‘Understanding Alternative Finance: The UK Alternative Finance Industry Report 2014’ (Nesta, 2014), those companies who have benefitted from PLF in the past year are typically small businesses with 60% having 5 or fewer employees. Their data suggest that the average amount raised by a company through PLF was approximately £70,000 ($110,000).
As this industry develops it is inevitable that the larger financial institutions will not just take an interest in it but also actively participate and develop new innovative business models of their own. We see more and more evidence of collaborations between emerging market leaders in the ‘alternative finance’ sector and the more forward-thinking established financial groups.
Image credit to: Wirawat Lian-udum (http://bit.ly/1yWNkJK)
Serial entrepreneur with an operational background in finance and technology companies. Paul was previously responsible for the development of the Crowd Valley product suite as part of the Grow VC Group. Paul is a regular speaker on new financial models and crowdfunding and has been involved in working with Crowd Valley's pioneering customers across the financial services sector, as well as advising global institutions such as the World Bank and national regulators such as Italy's CONSOB.
Paul has over a decade's experience working in various operational, sales, marketing, and product roles within technology companies, including two B2B startups that have achieved eight-figure exits following 100% year-on-year growth. He started his career in product development and testing roles at IBM's Hursley Research Lab in the UK before going on to eBay, UBS, and Barclays. Paul holds an M.A. (Hons) in Computer Science and Philosophy from Churchill College, Cambridge University. He has lived and worked in Texas in the US and Portugal, and speaks fluent Portuguese and French.