Alternative investments platform iCapital lands $440 million in fresh funding

Alternative investment platform iCapital Network Inc. announced Tuesday a $440 million funding round that pushes the fintech’s valuation to $4 billion.

The startup, founded in 2013 in New York City, provides tech-driven automation of alternative investment products to financial advisers, a process that was manual and tedious before technology was able to step in, said iCapital CEO Lawrence Calcano in an InvestmentNews podcast this week.

Currently, iCapital gives advisers and their high-net-worth clients access to private equity, private credit, hedge funds, and other alternative investments to increase diversification of portfolios. With the latest cash influx, iCapital plans to expand its current menu of alternative investment products, enhance its technology platform and pursue more acquisitions to broaden its client footprint, according to the announcement. 

Since announcing its last fundraising round in March 2020, which the company closed at $162 million, iCapital has undergone a period of transformative growth thanks to increased investor interest in alternatives. Assets serviced by iCapital have exploded to $80 billion across more than 780 funds to date, up from $46 billion, doubled its employee head count to 450, made five acquisitions, including the acquisition of Wells Fargo’s alternative investments feeder fund platform and rival Artivest and widened its international footprint. 

That type of growth has coincided with a number of traditional firms that have already tapped iCapital to provide independent registered investment advisers easier access to alternative investments. Schwab Advisor Services adopted the platform in October 2019 to allow its advisers to pre-qualify clients and provide them with research on the funds. iCapital also powers alternative platforms at JPMorgan Chase and Fidelity Investments.

Envestnet announced this month partnerships with UBS Group AG and iCapital to launch what the firm is calling an Alternatives Exchange, designed to provide curated UBS and iCapital alternative investment products to the 106,000 advisers on Envestnet’s platform.

iCapital’s foundation is based on the belief that leveraging technology is the only way to manage and scale access to these types of investments as financial advisers’ appetite for alternative asset classes increases, Calcano said in an interview last month. 

Sales of alternative investments, including nontraded real estate investment trusts and business development companies, by financial adviser and brokers have skyrocketed so far in 2021, reaching $31.7 billion over the first half of the year and are on pace to reach nearly double that amount by the end of year. 

In fact, sales of such alternative investments are so strong, they have already surpassed last year’s total of close to $27 billion, according to research by Robert A. Stanger & Co. Inc., an investment bank and research firm. 

Singapore-based investment company Temasek led the fundraising round, joined by new investors Owl Rock, a division of Blue Owl Capital; MSD Partners, L.P.; Noah Holdings and Golub Capital. Additional commitments came from existing investors WestCap, Ping An Voyager Partners, Blackstone, UBS, Pivot Investment Partners, BNY Mellon, Wells Fargo, Morgan Stanley and Goldman Sachs Asset Management.