The Impact of Regulatory Changes in Alternative Investing

There have been some regulatory changes recently, impacting the alternative investment sector of the financial industry.  The custody rule, which is there to protect investors, has been a significant factor in recent years, according to JP Dahdah, CEO of Vantage Self-Directed Retirement Plans.  During the recession, stories similar to that of Bernie Maddof, where the SEC got a lot of “egg on their face” with questions being asked oversight and if they were doing their job correctly in order to prevent such fraudulent activity by investment issuers.  There has been more cost associated with the increased compliance and it’s forced any advisors to have an appetite and are comfortable in placing their clients’ assets into alternatives, to really take a hard look at companies like Vantage, that serve as a custodian that is operated separately from the broker dealer or investment advisor.  This allows them to exempt themselves from any surprise examinations and reporting based on the current compliance rules, Dahdah explains.

The registered investment advisors are having to keep up with these regulatory changes and have their operation adapt to the new rules in order to stay competitive.  The product mix has become more broad as a result and as such, investment advisors are looking at alternatives in order to differentiate themselves.  High net-worth individuals have an appetite for alternative investments and want advisors to help them identify unique opportunities in the marketplace, Dahdah says.  In listening to their clients, investment advisors have learned this and as such, are having to do their homework in order to stay compliant and at the same time, are benefiting from the fact that alternative investments have come to the surface right now, with many start-up’s “coming out of the dark.” 

Through crowdfunding and online investing portals, firms are able to gain access through alternative investing product offerings.  One of the biggest trends right now is financial technology start-up’s, according to Dahdah.  There has been a huge surge of companies offering a comprehensive array of opportunities in alternative investments for both registered investment advisors and broker dealers, as well as for the accredited investors. 

JP Dahdah

CEO, Vantage Self-Directed Retirement Plans

Source: linkedin.com

Dahdah says it’s important to keep in mind that these are start-up’s, with people looking to monetize on creating an online marketplace, and there still hasn’t been a lot of online transactional flow through these portals.  He attributes this to a lot of skepticism as it relates to these new portals however, people are watching and paying attention that this might be an interesting shift for Americans looking for alternative ways to build wealth.  Dahdah believes that within time, this sector of alternative investing will be purchased through these portals at a high volume.  He says that “we’re at a very unique and exciting time in the alternative investing industry,” as people gain more confidence in placing dollars in these online portals.

JP Dahdah is the ‎CEO at Vantage Self-Directed Retirement Plans and spoke with Alternative Investing News providing online alternative investing video news content.  Alternative Investing News is a featured network of Sequence Media Group.  This video was brought to you by Vantage Self-Directed Retirement Plans.

Are Women More Attuned to Alternative Investments?

According to a new study by New York Life, wealthy women are more likely to put their money in alternative investments, such as commodities and private equity, than their male counterparts.  

Traditionally thought of more conservative in their investing, this study shows a shift in how women are investing.  Troy Vanderburg, CEO of the Alternative Investment Store, says that alternative investing has "changed the landscape" across the board in the last few years.  Alternatives have been considered more safe and investors have found that just because something is considered an alternative, doesn't mean there's more risk.  

Vanderburg believes women are more likely to go outside the traditional boundaries and alternatives offer a lot.  Men have always considered private equity quite risky but if there is a company that is being backed by a private equity fund, women are more likely to seek them out and invest with confidence.  

Women with a portfolio of over $1 million are looking at a 30-year retirement and Vanderburg believes alternatives offer confidence to investors across the board.  Ignoring longevity as part of the decision-making process would be a mistake, he says.  The investor's mindset over the last decade or so has switched from a "buy and hold" to more of an active participant, while still viewing their portfolios for use over their lifetime.  

Troy Vanderburg

CEO, Alternative Investment Store

Source: alternativeinvestmentstore.com

Another study has recently indicated that alternative mutual funds accounted for 3% of all mutual fund assets last year and that number is expected to double by next year.  This fast growth is "substantially changing the industry," says Vanderburg and he sees a bull run in alternative investments for the next ten to twenty years, as the aging population is wanting stability, longevity and active managers with a specific skill set.  The mutual fund arena is allowing for easier access to alternatives and providing a good product and management team behind those products, which makes for attractive opportunities for today's investors.

Troy Vanderburg is CEO of the Alternative Investment Store and spoke with Alternative Investing News, providing online alternative investing video news content.  Alternative Investing News is a featured network of Sequence Media Group.  This video was brought to you by Vantage Self-Directed Retirement Plans. 

Private Equity Gains as Hedge Funds Lag

The Wall Street Journal reports that as hedge funds lose some of their popularity amid poor performance and too many offerings, private equity is becoming more popular with advisers looking for diversification. Joe Dwyer, Portfolio Manager of  a Tech Focused Private Equity Fund based in Chicago and an adjunct professor at Northwestern’s Kellog School of Management says "private equity is often a more tangible way to increase alternative investment allocations."

On average, performance by hedge funds trailed the stock market since the financial crisis, as stocks have soared and competition among hedge funds has increased dramatically. 

Private equity ownership has a number of important advantages that allow it to create value and realize capital gain in a more repeatable, predictable fashion. Investors typically find private equity investments easy to understand. Many of these investors have been on the receiving end of these transactions themselves while running companies.

The potential company investments for private equity are enormous. They can invest in companies that are at the beginning of their growth cycle and in private hands.  They can invest in the less popular divisions of larger corporations or take private those public companies that are under performing in the stock markets.

Private equity firms invest in companies to make them more valuable than selling it to a buyer who appreciates that lasting value has been created. Private equity firms are therefore patient investors, unconcerned with short term performance.  

Investing in Legal Funding

"Investing In Justice"  Author Max Volsky

Alternative assets have become popular in recent years, mainly because they offer superior returns and are uncorrelated to traditional markets.  Legal finance – also called lawsuit funding, lawsuit loans, pre-settlement funding, tort advances, plaintiff advances, litigation finance, litigation financing, litigation funding or dispute finance – refers to investments in lawsuits. 

Max Volsky's "Investing in Justice" is the first comprehensive overview of the legal funding industry. In this AIN interview Volsky talks about the history and evolution of legal funding and the current opportunities for investors.

DLA Piper 2014 State of the Market Real Estate Survey

DLA Piper

In a year when the US economy found its surest toehold since the Great Recession, commercial real estate executives responded with their most enthusiastic appraisal of the domestic market since DLA Piper first started measuring their outlook back in 2005. In our 2014 State of the Market Survey, nine out of ten executives feel bullish about the next 12 months.  (Click the image below to download the study PDF)