An investment syndicate is an association or union of investors who pooled their funds and/or resources in order to handle a large transaction.
Coming together as partners allows them to engage in a transaction that otherwise might be unattainable to an individual. The advantages to you, as a member of the group is shared risk, as well as governance and reporting as all syndicate functions are handled by a syndicate manager.
We use the terms ‘syndicator’ (meaning the organizer of a security distribution), ‘syndicate’ (which refers to a group of institutional investors or investment banks) and ‘syndication’ (the process of grouping the syndicate or and organizing securities distribution), mostly in reference to commercial property, as is the industry norm in New Zealand. These terms however, are a few of many that can be used synonymously to describe types of investments and the manner in which they are structured, and ultimately offered and acquired by investors.
Broadly speaking, the investments we support and distribute, all have one thing in common; they’re held by groups of investors, that each hold a portion or percentage of the investment, and in so doing, share the risks, costs and ultimately, the financial benefits of being invested.
Since the 2008 global financial crisis we have witnessed a process often referred to as the “democratization of finance”, which is essentially the swing by investors from institutional investors, to private investors.
This has been achieved by investors pooling their resources to acquire assets that they simply cannot access directly on an individual basis. Industries like crowdfunding is a prime example of democratization at play, where through cloud-based technology, investors can collectively participate on an equity basis in businesses across the spectrum, from start-ups to mature businesses looking to expand and grow.
The Role of the Deal Maker as Syndicator.
As investment banks and institutional investors in general see each other mainly as competitors, the Deal Maker is a neutral party who
1. identifies or creates a deal opportunity,
2. has said deal opportunity structured into an investment which essentially means transformed into securities
3. invites a group of investment banks, institutional investors,
4. presents said deal opportunity to said group
5. assembles said group contractually
6. has said group distribute the securities and thereby realizing the necessary investment.