Tech platforms ease investing in alts
Technology is opening up access to alternative investments, often getting around high minimums by combining multiple, smaller investments into a single fund.
One of the platforms seizing on the increased appetite for alts is iCapital Network, a system that has been white-labeled by 115 different financial services companies to provide financial advisers with access to alternative investments for their clients.
The unique appeal of iCapital, which has grown to $83 billion worth of investments since launching in 2013, is that the minimum investment is sometimes as low as $25,000, well below typical hedge fund minimums, which can be in the $5 million range.
According to Lawrence Calcano, chairman and chief executive at iCapital, the platform provides access to nearly 250 general partnerships, and is currently connected to more than 3,000 financial advisers.
The iCapital platform gets around the higher direct investment minimums by combining smaller investments into funds that represent a single, larger investment.
Another example of technology creating a path to the alternatives space is YieldStreet, which launched in 2015 when founder and CEO Milind Mehere grew frustrated about not being able to gain access to strategies he felt he needed to build a diversified portfolio.
Mehere’s inspiration was the experience of riding blissfully into the financial crisis with a balanced 60-40 portfolio only to suffer a 50% decline when all was said and done.
The YieldStreet platform has grown to more than $2 billion with about 3,000 individual investors using the platform.
READ THE COVER STORY: Death of 60/40 model boosts interest in alts
“The last 12 months we’ve seen some of the biggest growth in our history,” Mehere said. “People want to modernize their portfolios; we’re seeing a lot of movement in fashion assets, collectibles and art.”
At this point, YieldStreet is a platform for retail investors, but Mehere said the focus over the next 12 months will be creating access for financial advisers.
Equity Advisor Solutions, a custodian launched in 2010 that caters to advisers with client portfolios holding alternative investments, is another example of the industry embracing alternatives.
“We saw a void in the space,” said Sean Gultig, the custodian’s chief executive.
“We are very alternative-investments-friendly, and we have a lot of advisers who do alternatives,” Gultig said. “The big box custodians charge extra per account for alternatives because it’s labor-intensive, but we’ll bundle it together and have asset-based pricing.”
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