Triad Advisors & Crystal Capital Partners
In partnership with Crystal since 2013, Triad affiliated advisors have the ability to offer their UHNW clients exposure to the industry’s institutional hedge funds with low investments minimums.
With 25 years of alternative investment experience, Crystal Capital Partners’ utilizes their expertise and deep network to provide exposure to third-party institutional hedge funds for client portfolios. Crystal’s manager selection process is conflict‑free, as they are not compensated by any of the managers in the program. They seek to identify firms with a proven track record, a dedicated risk management process, deep teams and institutional safeguards.
hedge fund industry ¹
of industry assets are managed by firms with
> $1 billion AuM ²
Gain exposure to third-party institutional hedge funds who manage over $1 trillion ³ in industry assets.
Tough, Prudent Questions for Alternative Investment Managers
In an industry with thousands of hedge fund firms, manager selection is complex. It requires analytical tools to help you verify data, qualitative review and operational due diligence, access to a network of managers, and ongoing manager reviews. Below are some of the prudent questions Crystal asks when identifying alternative investment managers.
Questions About the Firm
Who are the partners? What is their background?
The investment industry is a people business. It is important to understand who owns the firm you are investing in and how active they are in the business. Crystal's manager selection requires a proven track record through multiple market cycles.
Understand the institutionality of the firm from technology, trading teams, computer power, disaster recovery plans, and the ability to trade in different markets.
How much of the firm's AUM is partner capital?
Skin in the game is key. If manager compensation is heavily weighted towards performance fees, this will incentivize risk taking. When managers have a substantial portion of their net worth invested in their products, this balances out the incentive to take outsized risks with a desire to preserve capital.
What is the age profile of the firm's partners?
Understand where in the life cycle the key decision makers are. If they are nearing the end of their career, ask about the succession plan and get to know the next generation of the firm’s leaders.
When a partner retires, how do remaining partners dilute their equity?
Every firm has a different negotiated process for transitioning ownership. It is important the firm is transparent about it and has a training program for future leaders.
What plans are in place for hiring and retaining talent through time?
Long-term incentive programs must exist within the firm. If the investment talent is not properly incentivized, they will eventually leave to launch a new firm.
Questions About the Fund(s)
Who are the service providers?
Demand independent, top-tier administrators and custodians, the big 4 auditors and bulge bracket prime brokers and other institutional safeguards.
Describe the fund's risk management process. How do the investment and risk management teams interact? Do they have the power to override each other?
A dedicated risk management process must exist to provide checks and balances for the investment process. It is important that the risk team is not compensated in a way that incentivizes risk taking.
Is a fund dependent on one individual for its P&L?
Deep teams have a greater ability to identify investing opportunities across sectors, asset classes and regions. Deep teams also reduce the likelihood of key-man risk. However, if a fund is dependent on one individual for its P&L, make sure there is a key-man clause.
Do the fund's asset and liquidity mandates align?
If managers are investing in illiquid strategies, investors need terms that will ensure the manager won't be forced to sell the portfolio from a position of weakness. Liquidity tools can help you identify if the terms and assets are properly aligned.
Compared to its peers, how does a fund pair-up in terms of risk-reward, correlation and liquidity?
Always benchmark a fund to its peers using analytical technology that provides data on how similar funds are behaving.
How does a fund attempt to deliver alpha through time?
Invest with funds that cannot be cheaply replicated by a liquid index. Use tools that measure the alpha coefficient and help you understand the fund's historical performance and its future potential.
What is the demographic of the fund's investors?
Ideally a fund has a diversified investor base consisting of sophisticated institutions, family offices, high-net-worth investors, and is not too concentrated with any single of group of investors. Crystal works with third-party operational due diligence providers who provide insight into a fund's investors base.
Crystal's investment committee meets quarterly to discuss the results of their rigorous quantitative and qualitative assessments with respect to a prospective fund. As part of the manager selection process, Crystal decides if the fund’s performance and metrics are compelling from a quantitative standpoint, if the fund is structurally and operationally stable, if the documents are consistent with the stated terms, and if this all aligns after an onsite visit with the manager. Once an initial investment is made, the review is ongoing. Crystal is always evaluating new funds in the marketplace.
¹ Hedge Fund Research (HFR) and Preqin as of 12/31/2018
² AIMA HF Manager Survey, HFR 2018
³ Total AuM represented by the funds on Crystal's platform
This is for informational purposes only and is not investment advice or an offer to sell or the solicitation of an offer to buy any interest in any entity or investment vehicle. Any offer to sell or solicitation to invest will only be made through the Offering Documents of one or more investments managed by Crystal and will be qualified in its entirety in accordance with all applicable laws. These investments carry certain risks, see Offering Documents for more information.