When you look around at the universe of investment opportunities, it becomes clear that private markets are broken.
The market for alternatives — things like venture capital, private equity, real estate and crypto — is booming, with more than $5 trillion expected to come into this market over the next four years. It’s further proof that the traditional 60/40 portfolio allocation model doesn’t work anymore with yields low and public equities hitting all-time highs. Generating the returns investors are used to requires taking on more risk, driving all this attention in alternative asset classes.
But there’s one problem.
While public markets are more accessible than ever — with social media and fee-free trades attracting a whole new generation of investors — private markets remain closed off, even to high net worth individuals. Supply and demand is concentrated among a select group of insiders.
We built Gridline to solve these persistent inefficiencies. We want to help individuals invest like the most successful endowments and family offices that are using alternative investments to generate excess returns. Big endowments like Yale put as much as 60% of their portfolio in alternatives and are reaping the benefits as a result of having exposure to diversified, non-correlated assets.
Friction for Investors and Managers
The problem isn’t just on the investor side. Emerging and even established fund managers are spending weeks and months — as much as a third of the time they’re raising capital — just identifying potential investors. Even the largest global funds struggle with how to bring retail investors into the fold and diversify the contribution base.
Those investors are out there, but they’re stuck on the sidelines waiting for an invite.
Opening Up Private Markets
What alternatives have been clamoring for is a matchmaker, that connective tissue that brings investors who aren’t experiencing the returns they want and alternative asset managers who need a bigger audience together in a unified marketplace. Gridline achieves this by providing access to an expertly curated set of funds while leveraging technology to streamline the often cumbersome process of investing in alternatives.
We’re strong believers in the power of actively managed funds. The alternative investment landscape has seen a lot of focus on investments in individual companies or things like one-off real estate deals. But we’ve worked with great advisors and capital allocators and know the added value they can bring in turning a good company into a great business over time.
That’s why we’re starting with venture capital funds that we’ve picked based on a comprehensive selection criteria, with a bent toward managers with results verified by empirical evidence and a vested ownership in their funds’ success. These are not people spinning up an SPV to capture the upside with none of the downside risk — their livelihood depends on the success of the total fund and their investors get that benefit. Our users will be able to access these funds — which traditionally required as much as $1 million in liquidity — with minimums as low as $100,000. We’re keeping our fees low, charging an AUM fee that ranges from 0.5%-1.0% on invested capital.
Building the New Rails
The financial products themselves are only part of the problem we’re addressing. We’re also building industry-leading technology to improve the “rails” that make investing in these asset classes challenging. We’ve seen this kind of transformation in areas where offline, manual financial processes have been replaced by fintech applications in payments, lending and other banking services.
In alternatives, there’s a lot of messy back-end processes like investor questionnaires, KYC, treasury management, capital calls and tax reporting that can all be done digitally. We’re automating and leveraging technology to make that part as easy as executing a trade in the public markets online.
Toward a New Future
Tackling both sets of challenges I’ve described opens up private markets to a whole new set of investors. Investing in these asset classes today is out of reach for far too many and we’re excited to be building a future where everyone can have access to endowment-style investing and reap the superior returns it offers.
Put simply, we are building a platform that enables individual investors to emulate what the smartest investors in the world are doing with their portfolios. Our platform provides individuals the ability to discover and build a highly diversified alternative asset portfolio while concurrently expanding the pool of investors funds can leverage … we hope you join us on this journey.