Recent years have seen explosive growth in the retail market for alternative investments, or “Retail alts” in the shorthand of the industry. Once the domain of sophisticated, wealthy qualified investors, the alternatives marketplace is being demystified and democratized. According to RIA Intel, around 45% of private wealth advisors allocate some of their client assets to alternatives.
What’s driving this phenomenon? Investor demand, for starters. High net worth and mass affluent investors are asking their advisors for broader diversification of their portfolios. And, at a time when the public markets are somewhat lackluster, exposure to the non-correlated, alpha-generating potential in private equity, private capital, and real estate is very attractive. Everyday investors also appear to be less averse to the risk and liquidity concerns historically associated with alternatives compared to more traditional asset classes, particularly as tighter regulatory controls have led to increased transparency in the sector. Meanwhile, fund managers are eager to tap into a large and growing capital-raising channel, with some even lowering minimum commitments to accommodate more investors.
Despite all the buzz surrounding this opportunity, however, it is not without some significant operational challenges for all parties across the spectrum. The alternatives ecosystem remains complex and lacking in standardization. Transaction volume is escalating rapidly, yet processes are still largely paper-based and manual. On the distribution side, asset managers have to figure out how to manage multiple broker-dealer relationships, not to mention the nuances of different channels.
The good news is that today’s advanced technology makes it easier for RIAs and broker-dealers to access Alts on their clients’ behalves, and easier for fund managers to service a vast retail investor base at scale.
SS&C brings a unique combination of expertise and advanced automation technology to support alternative and traditional asset managers, as well as broker-dealers and RIAs that want to participate in this space. As the world’s largest fund administrator, we have a long history of servicing the administrative and accounting needs of the private markets, with support for illiquid and semi-liquid asset types. As more third-party broker-dealers come into the retail Alts arena, they are demanding independent NAV calculations over those provided by fund managers. That in itself is a compelling reason to have an experienced administrator like SS&C, with an automated and streamlined NAV process that ensures greater timeliness and accuracy.
On the investor side, we are also the largest retail alternative transfer agency, supporting 19 of the top 20 public program sponsors. Our comprehensive TA capabilities encompass investor servicing, transaction processing, compliance reporting, and distribution support, with automated connectivity across the broker-dealer universe. Our online portals bring transparency into transaction processes for broker-dealers and advisors, as well as into capital-raising activity for asset managers.
This unique combination of private markets and transfer agency expertise under one roof effectively bridges the gaps among all market participants. These are long-standing, proven capabilities that we are now bringing to bear for retail alts, along with the scale to handle the volume and velocity of the marketplace. With the recent addition of Blue Prism to the SS&C roster, we are ramping up the introduction of robotics automation to support the growing volume of subscription and redemption activity and service thousands of retail investors.
SS&C represents a seamless, end-to-end solution from fund accounting and administration down to the individual investor statement. You can contact us or visit our "Registered Fund Services" page to learn how we can support you as either a seller or buyer in the vibrant retail alternatives market.
Written by Chris Shaw
Head of Retail Alternatives