As the old saying goes, “Enough is never as good as a feast.”
And without question, the past 12 years have amounted to easy feasting for family offices, wealth managers and strategic allocators at institutional funds in delivering investment returns.
With juicy year-over-year gains across the equity markets during this period, industry pundits have opined loudly about “the death of actively managed strategies” while questioning the value of alternative assets until relatively recently.
Like revelers at a vast dinner table laden with every possible delicacy, strategic allocators and financial advisors have been content to leave worries about future harvests for another day.
Complacency Never Ends Well
We all know how this industry-wide complacency ends. The world has lurched from multiple waves of a global pandemic, to massive supply chain disruptions, to surging inflation, to war in Europe with severe economic uncertainty and market volatility each step of the way.
And now, professionals with stewardship over the assets of pension plans, endowments and multigenerational family wealth are interested in alts once more.
From risk diversification, to generating durable yield, to driving returns that are inversely correlated to plain vanilla equities and fixed income, alternative assets can potentially replace the returns that investors have come to expect from passive strategies in the broader equity markets.
But while interest in alternatives is intensifying, the brutal reality is this: Years of being largely overlooked have left the alternative assets space deficient in multiple areas.
Indeed, even many of the tech-enabled alts platforms that have come into being in recent years are propagating the same shortcomings of the broader alts space while luring financial professionals into a false sense of turnkey user complacency.
Fundamental Deficiencies Across Alts Platforms
Let’s recognize the fundamental shortcomings across most of the alts space today, including alts platforms:
• Fragmented and static data. Historically, data on alternative investment managers has been difficult for many allocators to find, as the sources for this data are fragmented and operate in their own silos.
Data on alternative managers is also expensive for allocators to access, since database vendors typically charge high fees, and other providers tend to be conflicted by the nature of their business models. And many alts platforms are providing data that either isn’t dynamic, or worse yet, isn’t truly objective.