Why the ‘why’ matters for Hedgehog
4 core beliefs that guide us
Before Michael and I founded Hedgehog, I spent the majority of my career helping institutional investors, like pension funds, build globally diversified portfolios of investments in private companies, real estate and infrastructure. I experienced first-hand that individual investors are, for the most part, excluded from accessing the benefits of investing in real assets. The potential benefits are so attractive that we, and others, are convinced individual investors would get in on the act, if they could. The industry recognises the opportunity for change.
So in 2021 we set out to broaden access to investing in these ‘real’ assets. No small challenge, given the complexity of the investment process and all the different players involved. It’s easy to get distracted, if the job at hand isn’t straightforward. But what has kept us on the right track, is a set of beliefs that we use to remind ourselves why we started Hedgehog in the first place. They together formed our purpose and positioned us as a company. And as it turns out, what we believed on day one is still guiding us in our mission today.
1. We believe in the value of real assets
Real estate and infrastructure represent trillions of dollars of value, locked up in tangible assets that we can touch and feel. Due to the income producing characteristics of assets like these, and their potential to increase in value over time, sophisticated investors like pension funds appreciate the benefits these assets can bring to an investment portfolio. As a result, they are investing in the asset class in ever-increasing amounts: $313bn was invested in real estate and infrastructure closed-ended funds in 2021 alone, according to Preqin.
However… individuals struggle to participate. Commonly, a lot of capital is required to make direct investments in these high-value assets, or to meet the minimum investments of the fund products available to high net worth investors, and this constraint has typically resulted in a small pool of large investors being the only customers.
Regulation is the biggest barrier to broadening access: Marketing laws relating to the investment products that can and cannot be made accessible to private individuals are often stringent but uniquely different in each jurisdiction. This means any claim of “democratisation” in the context of the asset class remains contentious. So far, regulatory barriers have largely restricted access to wealthy individuals.
The first step to “democratisation” in any asset class is having a regulatory compliant investment product that everyday investors can buy.
2. We believe in the long-term opportunity for retail investors
The likes of Revolut and Monzo have raised consumer expectations that we can all take greater ownership for our finances. In traditional asset classes, apps like Robinhood in the US and Lightyear in Europe are already meeting consumer demand to access investments that were previously considered out of reach for us as individuals. We are convinced that providing the same access is also achievable in private markets.
However… illiquidity puts people off. For an individual considering new investment options, the ease with which an asset, or security, can be converted into cash is often a priority. Recent moves by some of the largest real estate fund managers in the world to limit withdrawals from their semi-liquid funds have served as a reminder that providing regular liquidity in an illiquid asset class is a tall order.
Can digital transformation create a new paradigm? Hedgehog makes investment tokenisation available for asset owners that want it, as a first step towards providing access to improved liquidity for investors.
3. We believe in the digital transformation of financial markets
As blockchain technology advances and the embedded finance ecosystem evolves, the future we see is one in which all the financial affairs of a digitally-native, crypto-savvy consumer can sit side-by-side in one digital account. With a private key, a user can trade assets with other digital accounts in transactions that are direct and instant.
However… Operational requirements are an obstacle for investors. Investing in private markets involves operations and processes that are not immediately compatible with the way traditional private wealth distribution channels work. Few operations have been digitised and the industry relies on manual processes to integrate with the essential ecosystem of distribution partners: the intermediaries like banks and advisers that act as the point of entry to the asset class for an individual investor.
Our platform is built to integrate in the customer journey of other financial services providers. We offer users a quality of UX/UI that we believe modern consumers demand and the focus of our technology is to digitise and automate as much of the investment lifecycle as possible.
4. We believe real assets can be a force for good in a low carbon world
According to CBRE, real assets are thought to be responsible for nearly 75% of all investments in decarbonisation and energy efficiency. As the asset class opens up, we believe individuals will want to align their investments with the outcomes most important to them and participate directly in the transition to a low carbon economy.
However… not all real assets investments align with sustainability goals. As a sector, real estate is responsible for 40% of all greenhouse gas, originating either from the construction of buildings or their use. The industry is in a period of huge transition, with owners, operators and tenants increasingly advocating greener alternatives to traditional, polluting building practices and materials.
This is why we only partner with asset owners that have a proven track record of value creation and sustainability, to provide access to investments in the future we see.
Building our platform in public
Our team is international and diverse, with senior experience in all elements of private markets fundraising — legal structuring, regulatory compliance and investor relations — as well as full-stack engineering, product, design, brand and research. We are lucky to have such great team members but the most important quality they have in common is that they all understand what we’re trying to achieve. We share these four beliefs.
Right now, our direction is clear. We’re focused on building a platform for owners of real assets that want low-friction, digital solutions for raising capital from individual investors. By doing so, we aim to make it easy for more people to invest in the world around us. We are excited by the journey ahead and we look forward to sharing it with you, here on Medium.
Nothing in this article constitutes financial advice or guidance. The content in this article is an opinion and is for general information purposes only. This article is not intended to be relied upon to make financial decisions. It is not intended to be financial advice. The value of your investment can go up or down so you may get back less than your initial investment. The article may contain links to third-party websites or resources. Hedgehog provides these links and resources only as a convenience and is not responsible for the content, products, or services on or available from those websites or in those resources, the links displayed on such websites or the privacy practices of such websites.
