“The potential of the private capital market is enormous” – portagon founder Jamal El Mallouki gives insights during Hedgework Talk

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Published on 5. April 2023
Over 50 guests of the financial industry, such as asset managers, banks and financial agencies attended the event, which is a regular community gathering for experts in the European financial hub. The 201st Hedgework meeting took place at the portagon headquarters in Frankfurt. In an interview with Jamal El Mallouki, Co-Founder and Managing Director at portagon, attendees had the opportunity to learn more about the vision and values that portagon represents.

What does portagon do?

Our white-label software empowers product providers in the private capital market to efficiently and digitally process investments, from investor accreditation to subscription forms, thereby expanding their reach to new investor groups. This not only enables product providers to mitigate existing margin pressures but also offers individual investors secure and legally compliant access to the private capital market.

Thus, we create a novel and reliable, as well as legally compliant, access to the private capital market for individual investors. At the same time, our solution enables product providers to access new customer groups, helping them to counteract the existing margin pressure.

The current macroeconomic environment suggests a continuing slowdown in raising capital from institutional investors. This means that the days of investment managers being able to close a fund within a few months are over. Therefore, it is particularly important to not only tap into new customer groups but also to involve wealthy investors in the private capital market in funds that were previously only reserved for institutional investors, in a legally secure, scalable, and cost-efficient way with the right software solution.

Given the enormous potential of the private capital market, we believe it should be utilized in an intelligent way.

Why do you believe that individual investors have so much potential?

As mentioned earlier, there has been a significant slowdown or even a decrease in inflows from institutional investors into the private capital market over the past year. At the same time, individual investors, such as UHNWIs, HNWIs, and LPs, are searching for new high-yielding investment opportunities. According to Prequin, a data analysis firm, the global private capital markets are expected to grow to $18 trillion by 2027, which will be distributed among all these investor groups.

In Germany, in particular, there is still enormous potential, as a study commissioned by us from the Frankfurt School of Finance & Management has revealed: over 40 percent of Germans hold their wealth in cash and bank deposits, compared to just over 30 percent on average in Europe. With Germans having higher average wealth, the so-called retailisation of alternative, secure capital investments through suitable digital access points presents good to excellent growth opportunities for alternative investment providers.

Why does investing in alternative investments make sense in the current phase?

With the current market conditions being challenging, the traditional mix of investments is proving to be somewhat counterproductive. In the past, stocks and bonds often moved in opposite directions, providing a hedge for each other. However, now they often move in the same direction, which inevitably leads investors to seek new investment opportunities.

Alternative investment product providers can serve these new investor groups more easily and efficiently through digitized product offerings. While new investor groups are rare in the private capital market, changing capital market regulations and emerging digital solutions present a unique opportunity for both providers and investors.

What are portagon’s USPs?

One of the biggest strengths of our solutions is the scalable and standardized investment process that enables the efficient handling of a large number of individual investments. We optimize all necessary processes from KYC/AML and setting up the financial product to investor management and an investor portal.

Additionally, we offer investors quick access to our products through intelligent white-label frontend features. They can invest directly through a button on the respective website (Execution Only), or they can use our fully digital subscription and advisory process (Advisory Suite).

By digitally connecting products and investors, we open up new business models and revenue streams to withstand margin pressure, which is a significant advantage in today’s market.