METHODOLOGICAL APPROACHES TO EVALUATING THE EFFECTIVENESS OF DIGITAL FINANCIAL INSTRUMENTS IN PRIVATE CAPITAL MANAGEMENT

Abstract

The rapid digitalization of the global financial sector has fundamentally transformed traditional models of private capital management, reshaped the logic of investment decision-making, and intensified the need to develop approaches for assessing the effectiveness of fintech solutions. The purpose of this article is to substantiate a comprehensive methodological approach to evaluating the effectiveness of digital financial instruments used in private capital management, grounded in a structurally formalized description of the domain. The methodological basis of the study is the method of tuple-based modelling, which makes it possible to formalize the domain of private capital management as an ordered set (tuple) of eight key elements: subjects (investors, intermediaries), objects (assets of different classes, including digital ones), instruments proper, processes, data, models, external environment, and outcomes. The developed domain model incorporates a detailed classification of digital instruments. Building on the constructed tuples, an algorithm is proposed for calculating an integral efficiency index that accounts not only for financial performance but also for process quality, the digital maturity of the system, and the impact of the institutional environment. To overcome the limitations of static performance assessment methods, a system dynamics model is developed that reveals causal relationships within identified reinforcing loops and a balancing loop that regulates the trade-off between pursuing high returns through illiquid assets and the need to maintain immediate liquidity. The practical value of the results lies in creating a foundation for the development of automated decision-support systems that enable investors to perform scenario-based portfolio forecasting and to optimize the choice of digital services in line with their individual risk profile. The scientific novelty of the study lies in integrating tuple-based structuring of the private capital management domain with an index-based efficiency metric and a system dynamics representation within a single analytical framework. The proposed approach can be used by wealth managers, robo-advisory platforms and regulators to benchmark digital financial services, design more robust product architectures and align them with investors’ long-term wealth objectives.