AIFs take digital turn as across-table deals go out of fashion due to Covid

Multiple firms look to skip physical meetings, documentation while acquiring clients

Investment funds for the very rich, which traditionally garnered money sitting across the table from their clients, are increasingly shedding their old-style approach.

Alternative investment funds (AIFs) are going a hundred per cent digital in client onboarding, unusual for an industry more used to face-to-face interactions. At least three major asset managers are in the process of, or have already put in place digital protocols. This would allow very large investments to be made without the need for any physical component to the process. The minimum investment in such funds is Rs 1 crore.

Players pushing hard on digital include ASK Investment Managers, Edelweiss Wealth Management and Motilal Oswal Asset Management Company.  

“Pre-pandemic, the entire process of account opening was done basis physical documents and there were multiple challenges faced such as mismatch between documents, incomplete documents, illegible handwritings…which made the average time to open an account…5-7 days,” said Prateek Agrawal, Business Head and Chief Investment Officer (CIO), ASK Investment Managers Ltd.

It had already launched a digital onboarding initiative for its portfolio management services, which reduced timelines to open an account by 3-4 days on an average. They sought to replicate this for the AIF segment.  It put in place a digital initiative which allowed onboarding to happen without physical signatures of any kind, which was easier to push in light of Covid-19.

“The pandemic situation has led to greater acceptance of such digital processes,” said Agrawal.

Anshu Kapoor, who heads Edelweiss Investment Management at Edelweiss Financial Services said that the organization also moved to a digital process a few months ago for its AIFs. This included the use of Aadhaar authentication and electronic Know Your Customer (e-KYC). They have digitized onboarding, making payments, distribution and managing drawdowns (when clients invest additional capital they committed earlier). They are now integrating Whatsapp and chat bot capabilities for customers.  Complete digitisation has an effect on post-investment processes too, he added.

“Top-ups become very easy, redemptions become very easy,” he said.

Akhil Chaturvedi Associate Director- Head-Sales and distribution at Motilal Oswal Asset Management Company said that an entirely digital AIF onboarding process is set to launch in around a fortnight. Wide-scale adoption is likely for the industry, according to him. Making investment easier for people who found the earlier process cumbersome will expand the market, according to him.

“It will become convenient for customers,” he said.

Parallels in the broking industry showed a record number of investment accounts opened even as people remained stuck at home during the pandemic. Mutual funds too have seen record inflows despite Covid-19 lingering on.  Both segments adopted digital means for customer onboarding.

There are still issues which remain in applying digital processes to non-individuals, said Anshu Kapoor, of Edelweiss. Limited liability partnerships (LLPs) and other entities have a host of documents which require to be submitted. They are working on making the process more seamless, he said.

Alternative investment funds have made investments worth over Rs 2 trillion. Their total commitments raised are Rs 4.5 trillion, according to March 2021 data from the Securities and Exchange Board of India. The numbers are released with a lag.

Category II AIFs have made Rs 1.4 trillion. They include private equity funds and schemes investing in distressed assets. Category III AIFs, which include hedge funds, have made investments worth Rs. 41,757.64 crore.  Category I AIFs include social venture funds, infrastructure schemes, venture capital funds and schemes investing in small and medium enterprises. They account for another Rs 18,611.93 crore in investments.