Get your questions answered about Dot
Alternative asset classes - Private markets, such as private equity, venture and real estate funds, as well as hedge funds have not been broadly available as they have required a large minimum investment – often anything from 5-10m to enter a fund.
Equally, private markets and alternative investing have been slow to adopt digitalization. We have seen fintech developments with challenger banks, but this is only just beginning in the asset management space in these asset classes. You can find online investment platforms but most of them focus on traditional asset classes and a passive investment style.
Dot entered the market to change the status quo. We have lowered the minimum investment threshold and we offer low cost access to top private and alternative funds. We are thus opening the investment universe so everyone can meet their financial goals and increase their wealth.
Dot was founded by investors for investors:
- The investment challenges we encountered led us to found Dot to change the status quo.
- We have “been there and done it” – founders with personal and institutional track records in building alternatives portfolios over the last two decades.
- We believe in freedom of choice to select the funds you are most interested in – not a blended off the shelf product.
We identify the funds that stand out from the crowd:
- Our long-standing experience means we know and find the managers beyond the tip of the iceberg.
- We select based on alignment of interest – teams that have a stake in their business like us.
- We are not a platform, but curate funds based on institutional standards, across asset classes for a diversified portfolio.
Simple and transparent:
- We have our own financial license and are regulated by the FCA.
- We use fintech to transform the investment process into a simple exercise like public market investing
- We are sharing our knowledge to demystify alternatives and how investment decisions can be made
- ESG is the future, funds are just starting this journey. We will not greenwash but provide transparent commentary
Dot charges a management fee of 0.50% on committed and invested capital, as well as a 1% up-front onboarding fee. Additionally, Dot’s funds incur establishment costs and are assessed administration, accounting and (audit) fees that range from 0.5% to 1% depending on the fund size.
Dot’s founders will commit capital to each Dot fund that gets launched.
No, Dot does not provide investment advice. We encourage our investors to obtain independent, qualified advice before making an allocation to a Dot fund. Additionally, to help investor decision-making, each Dot fund has been assigned a risk rating, a target return, and where applicable, the UN Sustainable Development Goals supported by the fund are indicated.
The minimum investment into a Dot feeder is £100,000 or USD/EUR equivalent. Each Dot fund is denominated in the same currency as the target fund into which it invests.
There are as many as 7000 active private equity funds in the market. Mega funds of $5 billion or more increasingly dominate buyout fundraising, making up more than half of the total in 2019(McKinsey Report 2020). The share of funds below $1 billion has fallen to a15-year low. Most of those raised just one fund, suggesting that attrition is mainly a result of one-and-done managers.There are a number of large brandnames that have become big asset managers, some of them listed on the stock market. Many of the world’s top investment minds have transitioned to working for boutique private and alternative asset managers, motivated by a combination of greater freedom and higher earnings potential. Therefore we search for the best in class managers across their categories and investment strategies. This is the investment process and the long standing two decades institutional experience provides these insights and relationships.
We have built an overview of our approach via the Dot Matrix.Investing in private markets has a two-tierstructure. On one hand weevaluate the management team’s capabilities, track-record and if they are ableto replicate their strategy for the new fund they are raising. We get to know them and sometimes it takes a number of fundsbefore we onboard them. We also consider themacro environment of the geography they invest in to see if the strategy will be well positioned as it is along-term strategy.
There is also an operational review where we evaluate all the documentation. From past documents proving their investment decisions to risk management and the firm’s financial position.
Strategies are identified through investor feedback and macro research, whereby we try to match investor demand and provide access to timely investment opportunities.
Managers are identified through acombination of professional networking and database/media research. We seek acombination of seasoned investment team and proven successful execution of theinvestment strategy in the chosen market.
We assess the quality of the investmentmanagement company and its investment and operating personnel to determinewhether they have the expertise and experience required to effectively executethe investment strategy.
We conduct an institutional qualityreview of a prospective fund’s legal documents and structure to determinefitness-for-purpose; we analyse the investment strategy to determine itsabsolute and relative attractiveness given the market environment and otherstrategies available for investment.
We review the fund and the firm’sgovernance framework and assess the quality of its service providers; and wereference the firm and its key personnel with existing and former investors(where possible).
Our objective is to understand thestrategy and market opportunity well and “get to know” the key investmentpersonnel before we onboard a fund to the platform. We would not onboard a fundthat we would not be prepared to invest in ourselves. We would not onboard afund that we are not prepared to invest in ourselves.
Yes. We are also working on expanding this with new members that have an institutional investing track-record.
Environmental, social and governance issues are important criteria in our fund selection process. Our approach to ESG assessment varies depending on the Target Fund’s objectives in relation to ESG and impact, and the Target Fund GP’s level of ESG integration. It is imperative that the GP’s approach and resourcing are appropriate to achieving the Target Fund’s stated objectives. At Dot, we aim to provide a range of funds that explicitly addressESG issues and that are aligned with one or more of the UN’s 17 SustainableDevelopment Goals.
Private markets are a category of investments made in unlisted, non-public securities. These include private equity (including venture capital), private credit, real estate, and infrastructure. They are termed “private” because the issuer is a private company or the asset/security is not acquired through an exchange. Because the issuers are private companies and their securities are not exchange-traded, often there is only limited information available about the companies’ operations and financial performance.
Any investment that is not described as traditional (such as long-only listed equities, bonds and corporate credit) may be defined as“alternative”. Alternatives include hedge funds and non-traditional long-only investments such as crypto currencies, insurance-linked securities, liquid private credit, royalties, and collectibles.
No. Hedge funds and private equity funds are very different.The term “hedge fund” is used generically to refer to a very wide range of actively managed strategies that may invest in or trade a variety of listed/public asset classes, currencies, and commodities. Most hedge funds are managed within open-ended funds. In contrast, private equity funds invest in the securities of unlisted/private companies on a buy-and-hold basis for periods of 5-10 years during which time the PE manager (the General Partner)usually attempts to add value to the company by assisting in its growth or optimising its balance sheet (its sources of funding). PE funds are typically closed-ended.
Private markets funds are typically organised as private closed-ended funds that do not allow investor redemptions. Private markets strategies are most often buy-and-hold, wherein the manager (the General Partner) undertakes value-adding initiatives over a period of several years before seeking to exit the investment through a private sale or a public offering.
A“feeder fund” is an investment vehicle established for the sole purpose of investing in one fund. As such, invested capital is said to be “fed” to the underlying fund.
These have been used for a long time to pool or collect capital from a group of investors, to include them under one entity in a fund. For example, wealth managers or fund of funds have been using these structures.
Capital is said to be “called” from a fund’s Limited Partners when the General Partner(or the fund’s administrator) issues a capital call notice. The capital call notice is a formal request made to Limited Partners to transfer some or all of their outstanding capital commitment to the fund. Limited Partners are legally required to respond to the call notice by transferring the requested funds on or before the notice deadline, which is typically 10 business days.
A distribution is a term used to describe a payment of income or capital made by a private markets fund to its limited partners. Distributions may be regularly paid or ad hoc, following the exit/disposition of a fund asset.
Private equity funds will begin making distributions of capital after the expiration of the fund’s investment period.Such distributions are made net of expenses, costs and fees that may be owed to the GP and/or any advisors. Material distributions paid by a Target Fund to theDot feeder fund will be distributed to investors as soon as practicable, net of any expenses and fees owing to the Dot GP.
We will issue quarterly reports. The platform is developing a more sophisticated performance monitoring system which will include the following functions:
- Detailed reporting from the fund-level through to the asset-level;
- Investment accounting for all investment types
- Automated returns, waterfall and portfolio calculations
- Workflows for capital calls, distributions, subscriptions and redemptions
- These can all be viewed in summary in the portfolio tool.
Yes, you can request an allocation at any time while the subscription period for the Feeder Fund is open. However, your allocation will not be confirmed until the aggregate amount of investor allocations meets the Fundraising Goal of the Feeder Fund.
You will have 10 business days to complete, sign and submit the subscription forms, and transfer funds to meet the initial capital call. We encourage you to read the offering documents and subscription forms of your desired Feeder Fund prior to making an allocation request. The subscription process can be completed online and executed with an e-signature.
Rather than transferring the entirety of your subscription monies upfront, private fund investments are typically funded in instalments. These instalments are referred to in the industry as "capital calls". As the name implies, capital is "called" by the manager when the need arises to fund an asset purchase. To simplify the administration of the Dot feeder funds and to keep operating costs down, we will typically call capital from investors in 3or 4 instalments, equally spaced over the investment horizon of the TargetFund, starting with an initial and upfront transfer of up to 50% of the value of your total subscription.
You will need to ensure that funds are received by Dot within 5 business days of receiving confirmation that your subscription forms have been accepted. You will be sent a capital call schedule setting out how much needs to be transferred and when.
You will have 5 business days to transfer the money after receiving a capital call notice.
Distributions will be made, net of fees and expenses, as soon as practicable after receiving a distribution from the Target Fund. Distributions will be paid into the bank account from which funds were transferred in response to your capital call unless alternative arrangements are made in advance, with the approval of Dot’s Chief Compliance Officer.
No, we currently do not accept U.S. person as investors.
Prospective clients must complete an online questionnaire that serves to identify them as HNW, professional, or ineligible. The on-boarding process embedded on the Dot platform can only accept subscriptions from investors who pass at least two of the criteria set out under FCA Rules (COBS 3.5.3R (2)). The 'quantitative test' states that- in relation to MiFID or equivalent third country business in the course of that assessment, at least two of the following criteria are satisfied:
- the client has carried out transactions, in significant size, on the relevant market at an average frequency of 10 per quarter over the previous four quarters;
- the size of the client's financial instrument portfolio, defined as including cash deposits and financial instruments, exceeds EUR 500,000;
- the client works or has worked in the financial sector for at least one year in a professional position, which requires knowledge of the transactions or services envisaged;
Each Dot feeder fund is structured as a Scottish PrivateFund Limited Partnership, which is a tax transparent vehicle.
To mitigate the risk of client defaultDot’s operating model is to call at least 50% of committed capital upfront atfund closing and schedule 2 subsequent capital calls. Capital will be called from Dot clients and cash held in reserve ahead of target fund capital calls.To keep client administration light all client capital will be called with 3capital call notices.
Net distributions of capital and income will be made as soon as practicable following receipt from the target fund.
Dot investors will be offered periodic opportunities to exit their commitment/investment via transfer to an existing or new qualifying Dot client. This will have no impact on the target fund or the target fund GP.
Each feeder fund will have a draw-down schedule that is aligned with the drawdown schedule of its underlying target fund. To simplify your investing experience and to minimise capital call administration, we plan to draw capital upfront and at predetermined intervals and to complete drawing down your subscription over 3-5 capital calls.