“I’m a serial entrepreneur, Airfund being my fourth business in the tech and the wealth asset management,” said Alexandre Harkous, chairman and founder of Airfund during an online interview on 5 February 2024. He explained that their mission was to democratise access to private assets for retail investors through a B2B2C platform whereby general partners (GPs) present the full profile of their products, such as in real estate, private debt and infrastructure.
The private market business is not yet a mass industry, and it still relies pretty much on paper
A digital platform created in 2021, “Airfund is still majority owned by entrepreneurs originally from the wealth management and the technology sectors,” said Harkous. The company has been supported by business angels (CEOs or former entrepreneurs) until the acquisition of a minority stake in 4Q23 by Amundi and Indosuez Wealth Management. Both injected €6m of fresh capital in Airfund.
The capital injection “enables us to gain experience from Indosuez and Amundi, complement our business through Fund Channel and access the best technologies to enhance Airfund’s platform,” said Harkous.
“Amundi and Indosuez will be involved in the governance and the strategic plans of Airfund while keeping on board the founders of the company,” said Nicolas Renauld, global head of private markets at Indosuez Wealth Management.
Digitalisation to enhance clients’ onboarding and the matching experience
The private market business “is not yet a mass industry, and it still relies pretty much on paper,” said Renauld. He noted that institutional investors still rely on lawyers to do the due diligence on the fund, hand-fill subscription requests, etc. He praised Airfund for easing the onboarding process from institutional down to retail investors through a digital interface between asset managers, distributors and investors.
“The platform matches asset managers with distributors that can be as varied as private bankers, financial advisor, family offices or insurers.” Harkous noted that the initial investors have been institutional investors, but it has gradually move into new areas such as “private” and now retail clients.
As a key benefit of the platform, Harkous explained that Airfund has fully digitalised the investment process, from the business initiation to the subscription, including the necessary signatures as well as capital calls and reporting, making the system easily scalable.
“The most important for us [is] to have the infrastructure in place as we had to improve our processes and our client interactions,” said Renauld. The investment and the partnership are timely as the entered into force on 10 January 2024. He noted that the recently onboarded institutional investors are also expecting a better digitalisation experience.
Airfund: a springboard for the distribution of private asset funds of Indosuez
“We are a bank and an asset manager of private assets, but we are not distributing funds from third party companies,” said Renauld. He thinks that Airfund will help Indosuez to enlarge the client base for the distribution of its funds internally (Indusuez, Amundi) and externally (financial advisors) in a B2B2C model.
“Private markets have been part of the business at Indosuez Wealth Management for more than 20 years… the firm aimed very early to democratise private assets to family offices and family holdings… and to increase the weight of private assets (near €8bn in asset under management) in our clients’ portfolios,” stated Renauld.
In a recent interview, Renauld was reported as saying in Les Echos on 14 November 2023: “[Our clients] are ready to accept a certain illiquidity in exchange for a performance bonus and more concrete investments linked to the real economy.” He thinks that the value-added metrics in the private market are easier to understand compared to public companies, which are sensitive to market volatility.
BtoC may be possible in two to three years on small tickets through tokens instead of fund shares
Furthermore, Renauld noted that their annual internal rate of return (IRR) has been 13% on average on Indosuez private asset funds since inception in 2001 until YE23. Indosuez claims that this performance accounts for the survival bias, but the figure has not been audited by independent parties. “Standard deviation can be wide between good and bad investments… but we still think that the sector can generate IRRs well above 10% annually through economic cycles.”
How will the interaction between Airfund and Fund Channel work?
“Fund Channel is a well-known European platform to distribute Ucits [undertaking for collective investment in transferable securities] products matching asset managers and distributor… Airfund has now become an extension of Fund Channel,” said Harkous.
Airfund provides all possible options: “it can operate as an open B2B [for managers and distributor] or keep the environment private for the Fund Channel-Indosuez ecosystem.”
Can you buy your private asset fund on Airfund outright?
Harkous claimed that Airfund is technically ready to serve retail clients in a full BtoC environment. Yet he thinks that private asset funds are not known enough for a broad-based distribution. He believes that more education on the various strategies is required for distributors as well as for clients.
“There are regulatory cross-border matters to account for distribution in target markets. They are looked at attentively by [fund] distributors… in addition to ,” said Renauld.
“BtoC may be possible in two to three years on small tickets through tokens instead of fund shares,” stated Harkous. In the meantime, he stressed the importance of financial advisors or private bankers to guide retail clients in their investment decisions.
This article was published for the Delano Finance newsletter, the weekly source for financial news in Luxembourg. .