For most managers, KYC is a regulatory box. A necessary one – something to be completed, ticked off, often handed off to a service provider. For most LPs, it is the first real interaction with the fund after the decision to commit has been made, and the first time they see how the manager actually operates day to day. By the time onboarding starts, the fundraise has done its job. Interest has been built, terms have been agreed, and attention has shifted to getting capital deployed. That is exactly the moment a clunky KYC process can undo months of relationship-building.
The data on this is sharper than most GPs realise. In CSC’s 2025 AML/KYC research, a survey of 400 senior fund professionals, 87% of LPs said they had declined or reconsidered a fund commitment because of AML/KYC concerns. 63% of GPs admitted they had lost investors or missed opportunities because of weaknesses in their own process. Onboarding delays and documentation issues were the most cited causes.
Compliance is still the point. But investor perception now sits right alongside it. KYC has quietly moved out of the back office and into the experience layer of the relationship. What LPs want here is straightforward: onboarding that runs to a timeline, a single point of contact, each document requested once, and confidence that their data is being handled carefully by people who take privacy seriously. When the process is unclear, repetitive, or poorly coordinated – multiple requests for the same information, vague turnaround estimates, long gaps with no update – LPs do not just see administrative drag. They start to wonder what else might be running this way once the capital is in, and what communication and responsiveness will actually look like once they are an investor rather than a prospect.
The same CSC research found that 88% of LPs are more likely to invest with managers who maintain a formal AML/KYC program, even where regulation does not explicitly require one. That is the shift worth paying attention to. Effective KYC is no longer just a compliance function. Looked at from the manager’s side, this is also the opportunity. A well-run KYC process is one of the earliest chances a GP gets to show, rather than tell, what their operating discipline actually looks like. It is a quiet signal to the LP that their capital is in steady hands – that if the manager is rigorous here, they will be rigorous everywhere else: in reporting, in communication, in how the portfolio is run. The managers who treat KYC as a chance to demonstrate quality, rather than a hurdle to clear, are the ones who turn first-time commitments into long-term partnerships.