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iCapital Buys Structured Notes Firm Axio Financial

iCapital is expanding into the structured notes market, bolstering its offerings for HNW clients and their advisors.

iCapital Network is buying structured notes platform Axio Financial, in a first for the alternative investments platform provider. Terms were not disclosed for the deal, but it comes just weeks after iCapital announced a partnership with Grayscale Investments that would facilitate investments in Bitcoin and other crypto assets, and months after the firm raised $440 million in a global funding round that resulted in a $4 billion valuation.

The transaction, expected to close before the end of the year, will see Axio’s structured notes systems added to the iCapital platform. Founded 11 years ago, Axio provides advisors with real-time data, analytics and reporting tools to evaluate, select and purchase structured notes for their clients. Axio also has its own customer relationship management system, used by issuers and financial advisors.

The acquisition is part of iCapital’s mission to “expand the scope of strategies and product types available,” as well as improve the firm’s technology, according to the announcement. iCapital services more than $86 billion in global client assets across more than 790 funds.

More than $72 billion in structured notes were issued in 2020, according to a report from Prospect News that was cited by iCapital. Issuances this year are expected to reach $86 billon. Of that figure, Axio expects to be associated with more than $9 billion—a slice representing more than 10%—this year.

“Axio’s position as a leader in this market makes them an ideal enhancement to our already robust platform and product offerings,” said Lawrence Calcano, chairman and CEO of iCapital, in a statement. “Advisors considering structured notes for their high-net-worth clients need best-in-class access, education, consultative support and enabling technology such as iCapital provides for other alternative offerings.”

Axio CEO Marc Paley and his team will be moved under Calcano’s leadership. Paley will have a new title as managing director and head of distribution. He will remain the leader of the Axio group after the deal closes.

Paley cited a “common purpose” behind Axio’s push into structured products and iCapital’s corresponding push into alternative investments. “We’re thrilled to combine our efforts to serve financial advisors and their clients,” he added in a statement.

iCapital’s acquisition of a structured notes technology provider like Axio is in the “sweet spot” for the former, said William Trout, director of wealth management at Javelin Strategy & Research. Earlier this month, Trout published a report called “Digital Platforms and the Guaranteed Income Conundrum” on the topic of annuities and structured notes finding increased popularity among investors.

By buying the platform, iCapital will be able to eliminate operational friction, provide portfolio visibility and expand a growing marketplace for high-net-worth clients eager for yield, said Trout. It will also be joining competitors like Halo, SIMON and Luma in providing tech-assisted access to structured notes.

It’s hard to overstate the opacity of structured products, he added. Like it has done for alts, iCapital will likely leverage its technology to provide better transparency and liquidity for advisors and their clients.

“This deal does represent a way of marrying product, in the form of structured notes, to the personal financial profile of the investor. That’s where the real power of this technology lies,” Trout concluded. “The Axio technology is a huge step forward in that regard.”

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