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It’s that time of year again when the great and the good of the alternative investment industry descend on Miami. Although, with a range of events in December also popping up in recent years – including our own Alternative Investment Cocktails and Bites networking event – it’s as if the Magic City is the epicentre of the space for two months, as opposed to two weeks.
I’m looking forward to catching up with existing connections, and making new ones, and I’m anticipating that a good chunk of the latter will be the registered investment adviser (RIA) / wealth manager cohort.
We’ve all read about the growing interest in alternatives in recent years from this group, and I’m sure that there are plenty of asset managers from the hedge and private markets industries that are looking to get in front of these folks in the hopes of one day getting an allocation.
However, what’s flying under the radar – at least in terms of the trade press out there – is the growing interest from these firms in launching their own funds or special purpose vehicles.
One of the drivers of this trend is that they want a more customised fund of funds-style structure, where they can select the underlying funds themselves. Pooling assets to meet minimum check sizes for favoured funds is one reason, but the main one is the desire for more control over the strategies and exposures of the underlying funds that their client’s money goes into.
But another is because we are seeing an increasing number of them seeking to do their own direct investments, something that would have seemed unlikely on a good day, and downright odd on a bad day, just a decade or so ago.
And there are plenty of opportunities for wealth managers to work on their own private equity or real estate deals thanks to a corresponding rise in the number of independent / fundless sponsors out there.
Despite a few recent court rulings that the private funds industry has claimed as a ‘win’, raising a fund is still a more onerous task than it once was due mainly to the regulatory burden (although increased investor education around operations and risk causing more compliance hoops to jump through has also contributed here). This has caused many a potential private equity fund manager to at least start life out as an independent sponsor while they build a track record.
But they also have more flexibility in terms of the transactions they enter into, offering unique opportunities that might not be available through traditional private equity or real estate funds.
It is this flexibility and consequent breadth of available deals that appeals to many RIAs, frankly as a selling point for themselves and the services they can offer their clients.
But it’s not only the fundless sponsor group that brings deal flow – the private equity and real estate funds themselves also get involved in sidecar deals, bringing in external limited partners such as wealth managers as partners.
Alternative investment fund managers heading to Miami this month will probably be interested mainly in discussing their investment fund(s) with the RIAs that sit across the table from them at one of the numerous conferences and events scheduled this month. Just don’t be surprised if those RIAs are just as interested in co-investment opportunities as they are the fund(s) themselves.
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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.