Strategic Wealth Partners was acquired by Kovitz Investment Group Partners, LLC ("Kovitz"), a registered investment adviser with the SEC on May 1, 2024. Strategic Wealth Partners is now a division of Kovitz and its registered investment adviser. Materials created prior to this date were created by Strategic Wealth Partners and are accurate as of the time of publishing.

A New Era: Private Asset Managers Are Embracing All Investors

In the ever-evolving landscape of investments, a significant trend is reshaping how wealth is grown and managed: private asset managers are increasingly opening their doors to high-net-worth and retail investors. Traditionally, private investments such as private credit/lending, real estate, and private equity were the exclusive playground of institutional investors and qualified purchasers (someone with an investment portfolio with a minimum value of $5 million or more). However, recent years have seen a paradigm shift. Why is this happening, and what does it mean for all investors?

 Appeal of Private Asset Investments

A big part of the allure of private assets is the ability to generate attractive returns without taking excessive risk or sacrificing portfolio diversification. Traditional public stocks and bonds are susceptible to market volatility, economic downturns, and emotionally driven investor decision-making. Private assets, often not directly correlated with public markets, can offer a differentiating return stream and potentially provide more stability.

Historically, private markets tend to exhibit lower volatility than traditional public markets. Part of the reason for this may be that the assets are not priced instantaneously like their public counterparts. Think about your personal residence. Technically, the price fluctuates daily, but because you are not actively marketing the house as for sale, the valuation can be seen as more consistent month-to-month.

As wealth managers, we view the lower implied volatility of private assets to be of the utmost importance in portfolio construction and a large determinant of the success of our client’s financial plans. Considering that 87% of all companies generating revenue greater than $100 million are privately held[1], we view private asset investments as crucial to our clients’ asset allocation.

For more additional information on how our firm views and approaches alternatives, check out our CIO David Copeland’s blog on alternative investments.

Accessibility for Investors

In the “old world,” capital call vehicles reigned supreme. You made a commitment to a fund, where they called your capital over time, and you were in the fund for its entire life, which typically spans 10-12 years[2]. Some qualified purchasers, who had previously had access to the world of private assets through limited partnerships, were not fans of the traditional 10-year lock-up and limited partnership structure. Given the abundance of wealth in the retail space of investors or those with less than a $5 million investment portfolio, there was a push for a change. Private asset managers wanted to create a new structure to provide for more frequent liquidity opportunities and to enable a new class of investors to have access to their products at lower minimums.

Enter the interval fund. An interval fund is an investment structure that periodically offers to provide liquidity for its investor despite being made up of mostly or completely private assets [3]. These vehicles are like mutual funds in that you can buy them daily. But when it comes to selling, pre-defined trading windows are offered periodically throughout the year to sell some or all of their investment if necessary. Interval funds also allow all investors to get access to private asset investments with lower minimums than traditional limited partnerships.

Technological Innovations Benefiting Investors

Innovation in financial technology has made it more feasible for private managers to efficiently manage a larger number of smaller investors. Technology platforms now exist that can manage the increased administrative load of multiple small investors, whereas it was once only cost-effective to manage a few large ones. This tech-driven efficiency makes it economically viable for private asset managers to work with retail investors. So, the reluctance from these managers to open the floodgates to all investors has been severely mitigated.

Conclusion

The push by private asset managers to provide greater investor access reflects inclusivity in a previously unobtainable space. This shift is not just about providing new sources of capital for private managers, but also about providing all investors with opportunities that were once out of reach. As this trend continues, it will reshape investment strategies and portfolio management across the spectrum of investors.

I’m proud to work at a firm that has always been at the forefront of this movement, and I am excited to see what changes and opportunities for our clients are on the horizon. If you have any questions about private assets or how and why we use them in client portfolios, please reach out to a member of our team.

 

[1] Apollo Academy, Many More Private Firms in the US (Link)

[2] Duane Morris, Transfer of Limited Partnership Interests (Link)

[3] Investor.gov, Interval Fund (Link)


Disclosure:

This article contains general information that is not suitable for everyone. The information contained herein should not be constructed as personalized investment advice. Reading or utilizing this information does not create an advisory relationship. An advisory relationship can be established only after the following two events have been completed (1) our thorough review with you of all the relevant facts pertaining to a potential engagement; and (2) the execution of a Client Advisory Agreement. There is no guarantee that the views and opinions expressed in this article will come to pass. Investing in the stock market involves gains and losses and may not be suitable for all investors. Information presented herein is subject to change without notice and should not be considered as a solicitation to buy or sell any security.

Strategic Wealth Partners (“SWP”) is d/b/a of, and investment advisory services are offered through, Kovitz Investment Group Partners, LLC (“Kovitz), an investment adviser registered with the United States Securities and Exchange Commission (SEC). SEC registration does not constitute an endorsement of Kovitz by the SEC nor does it indicate that Kovitz has attained a particular level of skill or ability. The brochure is limited to the dissemination of general information pertaining to its investment advisory services, views on the market, and investment philosophy. Any subsequent, direct communication by SWP with a prospective client shall be conducted by a representative that is either registered or qualifies for an exemption or exclusion from registration in the state where the prospective client resides. For information pertaining to the registration status of Kovitz Investment Group Partners, LLC, please contact SWP or refer to the Investment Advisor Public Disclosure website (http://www.adviserinfo.sec.gov).

For additional information about SWP, including fees and services, send for Kovitz’s disclosure brochure as set forth on Form ADV from Kovitz using the contact information herein. Please read the disclosure brochure carefully before you invest or send money (http://www.stratwealth.com/legal).

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