KYC in asset management: 5 proven strategies to speed up investor onboarding

The rise of evergreen funds

In line with the democratization of private equity, a growing number of management companies are launching “evergreen” funds. These vehicles are perpetual and open to continuous subscriptions and redemptions. Although attractive, evergreen funds also present operational challenges—challenges that can be significantly alleviated by digitizing the subscription process and customer identification (KYC) of investors.

A new approach to private equity

Traditionally, private equity funds were closed-ended, featuring a limited subscription window, a fixed lifespan, and a set number of investors determined by the end of the subscription period. In a model built around "closings," fund managers or their delegates were not pressed by extremely tight deadlines when performing due diligence on new investors.

However, major industry players have recognized traditional funds' limitations and the advantages that evergreen funds offer to many investors and distributors. Since 2018, the trend has gathered pace: key names in the French market—such as Eurazeo, Apax, and Ardian—and global giants like Blackstone, Hamilton Lane, Sequoia, Schroders, and StepStone have each introduced at least one evergreen fund to their offering. Capital inflows into these vehicles have been remarkable across various strategies (venture, growth, LBO, private debt, infrastructure, etc.).

The openness of evergreen funds also caters to time horizons extending well beyond the typical 7–10 years of a closed-end fund. In an era defined by artificial intelligence (and its need for data centres), along with healthcare and energy challenges, many investments—particularly in infrastructure (solar farms) or healthcare (biotech accelerated by AI and long R&D cycles)—require longer-term commitments.

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Evergreen funds offer significantly more flexibility than traditional models. Providing monthly or even bi-monthly net asset values allows investors to subscribe and redeem their units at almost any time.

Greater flexibility and semi-liquidity

Unlike closed funds, evergreen funds give investors immediate exposure to private (unlisted) assets, often without a J-curve. This means capital can be put to work instantly.

They also enable investors to maintain stable allocations in private equity, in contrast to traditional funds, which may face reinvestment risks and potential underperformance when proceeds are distributed.

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Lastly, because most evergreen funds are semi-liquid, investors have considerable freedom to redeem their units. The ELTIF 2.0 regulation clarifies semi-liquidity conditions, ensuring robust investor protection.

The trade-off: shortening onboarding times and digitalizing subscriptions‍

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Consider this example: an investor who wants to subscribe to an evergreen fund will typically submit a subscription form and supporting documents by the 15th of the month for acceptance at month-end when the net asset value (NAV) is still “unknown.” The management company has 15 days before the end of the month to review the subscription form and conduct necessary KYC checks.

Suppose the fund management company misses the end-of-month deadline. The investor’s subscription will be pushed to the following month—potentially at a different (and likely higher) price if the NAV increases. This highlights how failing to process a subscription form and quickly carry out KYC checks can harm the investor’s interests and the fund manager’s reputation.

So, how can we reduce the investor onboarding time?‍

Below are several approaches that, once implemented, can reduce onboarding time to one or two days in many cases.

Both compliance and middle-office teams have vital roles in achieving this ambitious but entirely realistic goal.

Strategy #1: Guide the user through a fluid collection interface accessible via a dedicated URL

There are several pieces of advice we can give here.

Firstly, unlike the traditional approach of collecting investor information by exchanging e-mails, we recommend collecting KYC information via a dedicated interface. This interface should contain four sections.

The first section concerns information on the subscriber.

• For individuals: surname, first name, date of birth
• For legal entities: name, legal form, company registration number and address.

The second section only applies to legal entities and concerns related persons, whether directors or beneficial owners.The third section covers the required documents. It should be noted that the list of required documents must be dynamic, depending on the characteristics of the investor wishing to subscribe. Indeed, depending on the role of the person linked to a legal entity, the nature of the documents expected will vary according to whether this person is a manager, a beneficial owner or both.

Finally, we recommend showing a confirmation screen summarizing what has been collected.The second important element in this section concerns the accessibility of this information-gathering portal: We recommend that investors be provided with a single URL to access the portal.

If the investor interrupts their onboarding, the information entered must be saved so that the investor can find it again when he or she connects to the URL later. If new documents are requested during the business relationship, the same information-gathering portal will be used to collect them.

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Strategy #2 : Run a preliminary check when documents are submitted

‍Maximize the likelihood that the correct documents are uploaded from the start. For instance, if proof of funds is requested, you need to set up a system that allows you to assess in real time whether the document sent corresponds to the expected type.Suppose the investor makes a mistake and sends a document that doesn't match. In that case, we need to be able to point this out to the investor straight away so that he can rectify the situation, rather than letting him continue to send an erroneous document, reviewing it afterwards, and then going back to the investor a few days later and asking for the correct document.The back-and-forth between investors, the middle office, and the compliance team creates a lot of friction, which is why it is so important to get the documents right the first time.

Strategy #3: Don't ask for what you can get yourself

This tip applies particularly to the onboarding of corporate investors. Company registers are full of the corporate data and documents traditionally requested when onboarding. So why ask an investor for them when they're increasingly readily availableThe compliance or legal team might note that it would be preferable, but not mandatory, for the documents to come from the investor directly. We agree with this analysis because nowhere in the AMF or ACPR guidelines or in the Monetary and Financial Code is there any requirement that "know-your-customer" information should come from the customer himself.

However, suppose the legal analysis concludes that it would be preferable for the information to come from the customer. In that case, the solution is to suggest information relating to the investor's company during onboarding.

‍Example: company data

‍In contrast to the traditional approach of requesting information already contained in company registers, it is now possible to facilitate the task of gathering information from investors. It's straightforward: when a corporate investor enters the first few letters of his holding company or structure - as explained below - he can find his company. This is made possible by the increasingly widespread availability of company register APIs, which can be consulted in real-time to enhance the customer experience.

Once the investor has found the company they represent, basic company information is automatically filled in the onboarding portal and suggested for final validation. The company name, incorporation number, legal form, date of incorporation, VAT number and address can be automatically filled in, saving the investor this tedious work and, once again, improving the customer experience. In addition, the fund's company increases the chances that all the necessary information will be collected the first time around, enabling a quick decision.

Example: data on related partiesThe opening up of company registers and related parties also makes it easier to collect information on individuals. In concrete terms, retrieving the names of directors and beneficial owners, their first names, dates of birth, and places of residence is now possible. Once again, if the information relating to these people is up to date in the registers, the end-user simply has to validate the suggested information. This again saves him the time of entering information already known from the registers. It also guarantees the completeness of the information collected so that compliance can make a decision as quickly as possible.

Example: expected documentsFinally, it is also possible to upload company-related documents during the corporate investor's onboarding so that they can be presented to them for validation. In concrete terms, the onboarding platform will display to the investor a certificate of this service or its open-source equivalent, the company's articles of association, and financial statements when available. This saves the user the trouble of finding the expected documents in these files, even though they are publicly available. This guarantees the completeness of the file so that compliance can make a decision based on a complete file.

Strategy #4: Anticipate enhanced due diligence measures

‍Enhanced due diligence measures are the source of much back-and-forth between customers, middle offices, and compliance. By avoiding as many round-trips as possible, you can maximize the chances of onboarding an investor "the first time", i.e., without any round-trips in 60, 70, 80% of cases, and perhaps even more.How to proceed? Based on the fund's risk matrix, enhanced due diligence should be conducted whenever an investor's AML risk appears to be particularly high. There are many reasons why compliance may consider a given investor high risk.

• For example, given the customer's profile, an investor or related person may reside in a high-risk country, be politically exposed (PEP), or have a particularly large amount invested.

In contrast to the traditional approach, which consists of collecting an initial set of information, analyzing it and, if necessary, requesting additional information, we recommend calculating the customer's risk during onboarding so that any additional documents requested appear during the final onboarding stage.In concrete terms, we recommend screening the names of natural and legal persons during onboarding and requesting additional documentation as a precautionary measure in the event of a hit.Another concrete example is if a customer enters an address in a high-risk country. The customer's risk score must be increased, and an additional document corresponding to an enhanced due diligence measure must be requested during onboarding.Generally speaking, we understand that dynamic onboarding, i.e. onboarding that calculates the customer's risk score, avoids the need to request additional documents in many cases.The aim here is to maximize the onboarding rate "on the first try", i.e. without returning to the investor several days later, after an initial analysis by the back office or compliance.

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Strategy #5: Automate or outsource document analysis and validation (IDs, proof of funds or other supporting documents)

‍Now that you've collected all the documents needed for the KYC analysis, you'll need to process this information so that compliance can issue a decision as quickly as possible.There are two ways of doing this:

1. The first is to carry out all these due diligence measures in-house.
2. The second involves outsourcing (managed services) the analysis of Level 1 documents to experts in the field.

Many more or less powerful and specialized modules are on the market for automating documentary processing of identity document validation.
There are several specialized services for validating identity documents or proof of address. There are also services for detecting forged documents of any kind.Finally, expert companies like us at Ondorse can help you orchestrate all document analysis workflows involving ID documents, proof of address, income supporting documents and financial statements. To this end, our platform leverages artificial intelligence models to detect consistency or inconsistency in a customer file simply. However, artificial intelligence is a co-pilot and does not replace manual analysis. It is simply used to save time by suggesting an analysis that an analyst must confirm each time. In most cases received, artificial intelligence enables an analysis the analyst confirms, saving up to 90% in document processing time.

At Ondorse, we work with many leading asset managers in various asset classes—private Equity, Venture Capital, and REIM—who can now onboard investors, both individuals and companies, in just a few days.