By Justin Partington, Global Head of Fund and Asset Managers
Onboarding has evolved from a back‑office administrative process into a defining moment in the investor experience. It’s now the very first interaction an LP has with a GP – and it sets the tone for the entire relationship.
Know-you-customer (KYC) has long been viewed as the unwelcome administrative overhead of private markets. A regulatory necessity, but rarely the topic of strategic conversations. Our latest KYC whitepaper challenges that view. Drawing on survey insights from more than 50 global fund managers collectively overseeing more than £967 billion in assets, our report reveals that KYC is no longer a box‑ticking exercise. Rather, it’s shaping investor experience, impacting fundraising velocity and influencing the broader competitive landscape.
Here are the five most significant takeaways from our research.
1. KYC is becoming a strategic priority, not just a compliance chore
For years, KYC sat quietly within operations or legal teams: important, but rarely transformative. That perception is shifting. According to the survey, 34% of managers now view KYC as an important operational requirement, while 16% already consider it an essential strategic priority.
Investor onboarding is no longer peripheral. It touches fundraising, investor relations, risk management, operational scalability and – crucially – reputation. Ambitious mid‑cap managers are paying close attention to the largest GPs, recognising that the firms they aspire to emulate treat KYC as core infrastructure rather than regulatory drag.
The era of KYC as a purely administrative obligation is waning. It’s steadily embedding itself into the commercial engine of the firm.
2. Documentation overload and jurisdictional complexity are the biggest operational blockers
Across our survey responses, one point came through loud and clear: KYC is causing firms to drown in paperwork.
- 54% of managers cited the sheer volume of documentation as their top KYC challenge
- 42% struggle with repetitive requests across multiple service providers
- 42% identified jurisdiction‑specific regulation as a major pain point
This reflects a three‑way collision between:
- Global investor bases
- Fragmented regulatory expectations
- Persistent manual processes
Many managers still require notarised documents in some jurisdictions. Meanwhile, retail capital flowing into private markets through multi‑layered intermediaries has added further complexity. Compliance teams find themselves navigating chains of distributors, custodians and wrappers before identifying the ultimate beneficial owner.
The good news is that the tools to solve this complexity are increasingly available. Technology and AI are emerging as the most powerful antidote to these operational bottlenecks; automating document handling, accelerating verification, reducing duplication and improving transparency across investor structures. Rather than adding complexity, modern KYC solutions are stripping friction out of the process and delivering the scalability that manual processes simply can’t support.
This raises a critical industry question: now that tech-powered solutions exist, are GPs actually adopting them?
3. Legacy systems are slowing onboarding – and delaying fund closes by weeks
The short answer is no. Despite innovation elsewhere in private markets, KYC technology adoption remains limited. Nearly half of respondents (48%) still rely on spreadsheets and email, rising to two‑thirds in Europe. Unsurprisingly, only 2% of managers describe themselves as “very satisfied” with their KYC tech stack.
The operational impact is significant: 74% of GPs report that KYC adds six to 30 days to fund closing timelines. Almost half report delays of more than 11 days. One onboarding team reported an extraordinary 700‑email exchange over just two weeks with a single investor group.
The cost is not just time. KYC inefficiency is actively undermining LP/GP relationships: one in seven managers can point to a real example where poor onboarding caused an investor to walk away entirely. In Europe, it’s one in five.
In today’s highly competitive fundraising environment, that is an avoidable loss no GP can afford.
4. In‑house KYC models are struggling to scale – prompting a shift toward outsourcing
The survey data shows a clear divergence between smaller and larger managers. Among firms with less than $5 billion in AUM, 52% still handle KYC fully in‑house. Among larger managers, 87% have shifted to outsourced or hybrid models.
The reason is simple: scale exposes fragility. As investor counts grow and cross-border complexity increases, internal teams hit capacity limits. Technology costs rise. Regulatory refresh cycles intensify. Ongoing monitoring becomes harder to sustain.
Managers are candid about these challenges. “The workload keeps expanding,” noted one respondent. “What feels manageable at Fund I becomes a breaking point by Fund IV.”
Outsourced models are offering not just efficiency gains, but also improved oversight, stronger auditability and faster onboarding – all without the cost of building proprietary systems.
5. The future of KYC is intelligent, reusable and investor‑centric
Perhaps the most encouraging finding is the growing industry alignment around what comes next. Our whitepaper outlines a future defined by five major shifts:
- Reusable digital profiles: Verified once, reused everywhere – eliminating duplication and reducing LP friction
- AI‑supported onboarding: Automated data extraction, verification and risk scoring with human judgement where it matters
- Global harmonisation of KYC standards: Less fragmentation and greater interoperability across geographies
- Technology as a competitive differentiator: Speed, transparency and professionalism at onboarding signal how a GP runs the rest of its operation
- KYC as the first test of trust: As IQ‑EQ’s Rachelle Miller put it: “Good KYC is good service.” KYC is fast becoming a marker of manager quality
Looking ahead
One message resonates through the research: KYC inefficiency is no longer something firms can tolerate quietly. It’s delaying fund closes, consuming talent, frustrating investors and, in some cases, costing capital.
The path forward, however, has never been clearer. The foundations of a smarter, streamlined and investor‑friendly KYC framework are already being laid, with technology, outsourcing and data intelligence leading the way.
At IQ-EQ, our KYC and AML solutions are designed to simplify investor onboarding, reduce operational strain and deliver a more consistent, professional experience for LPs – powered by proprietary compliance technology and expert teams with global reach.
To discuss how IQ-EQ can support your onboarding and compliance strategy, speak with one of our experts today.
