By Steven Brod - Bay Harbor Islands, FL - 05/14/2019

The Key Factors Financial Advisors Should Seek in an Alternative Investment Platform

Amid an ever-evolving landscape, an increasing number of independent financial advisors are turning to alternative investment platforms to gain exposure to private equity and hedge funds for their clients’ portfolios.

On the private equity front, 2018 saw the largest number of private equity backed buy-out deals of the last decade – upward of 5,100 – and the deal flow shows no signs of slowing down, according to Dechert, a leading global law firm. Furthermore, many PE performance benchmarks beat the S&P 500 and Russell 3000 over the last one, three, five and ten-year periods.

Demand for hedge funds is also rising, as institutional investors search for market diversification and risk management. A newly published JPMorgan Chase & Co. survey found that institutional investors are not only more interested, but actually flocking to hedge funds this year.

However, it is critical to understand that not all alternative investment platforms are created equal, as investing in institutional alternatives is not as simple or straightforward as buying a stock, mutual fund or ETF.


Below is a checklist of key factors that advisors should keenly consider when deciding which alternative investment platform to work with.

An experienced partner.

Because investing in alternatives is a long-term journey, advisors benefit from direct access to a seasoned team with a strong track record. Areas such as portfolio monitoring and rebalancing, liquidity management and client education require thorough and ongoing review throughout the life-cycle of these investments. For this reason, it is crucial to choose an alternatives platform with a solid track record and extensive experience through multiple market cycles.

Conflict-free, institutional manager selection.

It is not only prudent, but imperative to ensure that there are no economic arrangements between the alternative investment platform provider and the fund managers they invest with. Such economic arrangements often influence and/or create conflicts when assessing funds in which to invest. Be sure that the fund managers on the platform have proven track records over multiple market cycles, dedicated risk management processes, deep teams and institutional safeguards. The platform should be free of bias, poised side by side in alignment with the advisor and its clients.

Technology, research and presentation tools.

Leaning on an alternative investment platform goes well beyond access. Advisors must be equipped with an exhaustive bank of all the qualitative and quantitative tools required to navigate the complex alternative investment journey for their clients; which means that intelligent portfolio optimization, manager research, comparative analytics, consolidated reporting and client-facing deliverables should all be seamlessly integrated into the platform.

An efficient operational workflow.

Investing in alternatives involves time, effort and costly overhead, and most independent advisors simply can’t afford to support such an endeavor in-house. There is a tremendous amount of work required to successfully manage subscriptions, redemptions, rebalancing, liquidity, capital calls, distributions, statements, K-1s and other key operational requirements that go into building and maintaining alternative investment portfolios for clients. In order to stay competitive advisors should seek a high-touch alternative investment platform that provides an efficient operational workflow.


In sum, the financial advisory channel is one of the fastest growing and competitive areas in the financial services industry. In order to stay relevant and continue to evolve within the sector, advisors must continue to bring value to their clients by delivering a superior service that includes institutional alternative investments. Selecting the optimal alternative investment platform must involve serious consideration of the experience and alignment of its management team, conflict-free manager selection, robust portfolio tools, and a streamlined workflow — a dynamic constellation of fundamental elements that are in place, by design, to achieve real and lasting results.


- Steven Brod is the Chief Executive Officer of Crystal Capital Partners.

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