Investment Program Association rebrands itself for Main Street

Group advocating for investments like REITs, BDCs, close-end funds, and energy and equipment leasing programs changes name to Institute for Portfolio Alternatives

Apr 9, 2018 @ 6:00 am

By Mark Schoeff Jr.

An organization that promotes alternative investments is rebranding itself to highlight what it hopes will be a link to ordinary investors.

The Investment Program Association today changed its name to the Institute for Portfolio Alternatives. The group's mission is to raise awareness of what it calls portfolio diversifying investments, such as real estate investment trusts, business development companies, interval and close-end funds and private-equity funds, among others.

The name Investment Program Association didn't resonate, according to Anthony Chereso, president and chief executive of what is now the Institute for Portfolio Alternatives, which is comprised of 190 member firms.

"Nobody knew what that meant and how it related to our membership," Mr. Chereso said. "The new name is symbolic of the industry's evolution."

Alternatives have long been used by institutional investors. Now they're arriving on Main Street as a way to balance to stocks and bonds in a retirement plan, according to Mr. Chereso.

"We're finding that these products are becoming increasingly important to financial advisers as part of a diversified portfolio offering to their retail investors," he said.

But alternatives also can be expensive, illiquid and complex investments that carry higher risk than typical investors can tolerate.

"The idea that there is great investor demand for these alternative investments is a myth that's being promoted by an industry that is looking for new channels in which to sell their products," said Barbara Roper, director of investor protection at the Consumer Federation of America. "Middle-income investors aren't fully funding their emergency funds. They don't need hedge funds."

Mr. Chereso counters that alternatives have become more accessible for ordinary investors. He points to a Financial Industry Regulatory Authority Inc. rule that requires transparency in REIT pricing.

"Critics don't truly understand what a diversified portfolio includes," he said. "They may be looking in the rear-view mirror at historical product structures. We've made it more mainstream."

The alternatives industry recently got a boost when legislation that eased rules on BDC leverage was included in a federal government omnibus spending package.

Americans for Financial Reform opposed the BDC measure over concerns it would "increase risk to investors," said Marcus Stanley, the group's policy director.

"We consider that an outrageous bill, and they got it in a back room," he said. "I would expect efforts like that to continue, and we're going to push back on that."

Communicating with lawmakers about alternatives is a primary objective of the institute, which launched a political action committee this year to make campaign donations.

"There needs to be a balance between regulations that foster the industry and those that protect investors," Mr. Chereso said. "Our role is to help educate legislators and regulators around effective, efficient regulations."

The group will work both sides of the aisle. But the Republican-majority Congress and Securities and Exchange Commission has created a receptive atmosphere for the message that the institute and other alternative-investment groups are sending.

"It's opened up an opportunity to have a proactive conversation around investor choice," Mr. Chereso said.


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