The Case for Alternative Investments in Wealth Management

Here at Fundviews Capital, we have been banging the alternative investments / wealth manager drum for a while – it is in our DNA, to a certain extent, as many of you will know given my background in helping wealth managers create customised portfolios of alternative investment strategies.

And I’ve been penning some thoughts on various topics within the conversation here in my blog in the past couple of years as well.

Which leads me to a shameless plug for our latest whitepaper, “The Case for Alternative Investments in Wealth Management”, which you can download here.

I’m not going to repeat the entire document here in this article, but I do want to circle back on a couple of points which I think are most salient to those RIAs reading this that are time-poor (or attention poor…).

The first is the issue of the commoditization of the registered investment advisor industry. There is a perception of standardization in the industry given the propensity for many wealth managers to stick to the classic stock and bond portfolio allocation; alternative investments provide a way for RIAs to differentiate themselves from their peers. Given the multitude of asset classes within the private markets industry, from private equity to private debt, real estate to venture capital, and more niche strategies such as trade finance and life settlements, there exists a significant opportunity for RIAs to create more customized portfolios for their clients (depending on risk tolerance, of course). Better customer service and better options means more clients.

The second is the ability of alternative investments as a volatility mitigating tool. It is very tempting to look at the S&P 500’s performance this year and say ‘well, it is up around 6% this year and is now at all-time highs’. But volatility has been pronounced. If you bought an S&P 500 tracker on January 2, yes, you would be up around 6% so far. But if you sold it on April 8, you would have lost around 15% of your money. Private markets offer similar upside with less volatility; the private equity asset class, for example, has outperformed public equities, as measured by the MSCI World Index, by more than 500 basis points (5%) annualized.

There are additional opportunities for RIAs that want to explore this opportunity, such as launching your own funds, that I have offered some pointers on previously. That is probably one step further down the line for those yet to take the initial plunge into the big wide world of alternatives, but still, in my view, it’s an exciting one.

And there are other reasons why we would recommend RIAs that have not previously looked at alternatives to do so (as mentioned in our white paper). But ultimately, by doing so, we think that wealth managers will be able to grow their businesses by offering better options and products to their existing clients and onboard new ones quicker.

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Gregory Poapst is a Managing Partner at Fundviews Capital. Connect with him on LinkedIn here.

Fundviews Capital is a full-service end-to-end Fund Management Platform.  Our platform provides a complete end-to-end solution for asset managers or wealth managers to structure, launch, operate and grow their professional investment funds. You can launch a fund in a matter of weeks, not months, and with minimal capital outlay – not only reducing the risk of launching a fund but also maximizing your chance of success.  Once launched, you will find that a dedicated team of professionals is just a phone call or email away at all times, handling all aspects of the back and middle office for your fund.