For the past four years this column has chronicled the ongoing adoption of alternative investment strategies by the financial advisor community. As a manufacturer, manager, and distributor of these products I have often been challenged by the notion that although hedge funds have historically (and continue to be) the domain of the high-net-worth and ultra-HNW investor, the investment advisors that aspire to counsel this same prize investor demographic have been slow to embrace these strategies in their own practices and portfolios.
Advisors often explain their slow adoption rate (relative to HNW investors) of alternative investments as being a due diligence and access issue; they lack the means and resources to determine which managers are truly delivering alpha, and often cannot obtain client access to the most desirable managers of hedge funds and other alternative strategies.
A new initiative by a pair of accomplished hedge fund industry veterans seeks to resolve advisors' issues.
The former founders of the UBS Alternative Investment Group--Greg Brousseau and Mitchell Tanzman--have established a new firm, Central Park Group, dedicated to providing alternative investments to the independent advisor market. Manhattan-based CPG is backed by Bear Stearns Asset Management and AIG Global Investment Group.
At UBS, the CPG founders managed an $8 billion alternative investment platform that included hedge funds, funds-of-funds, private equity, and real estate. The group developed products managed by many of the biggest alternative investment firms. These managers generally have large minimums suited for institutional investors. Central Park Group will create structures that can provide access to sought-after pedigreed alternative managers at the $100,000 to $1 million level.
Access to to All Alternative Sectors
The group left UBS due to the growing interest in alternatives among private clients and smaller institutions and wanted to offer their services beyond the UBS distribution channel. "Advisors are rapidly becoming aware of the benefits alternatives can bring to their portfolio," notes Tanzman, but "most advisors and their clients don't have access to a full range of alternative investments. The focus of our firm is to develop products managed by the best in class across all sectors of alternatives, supported by effective educational programs."
While many of the larger full service brokerage firms have established alternative investment departments and begun to develop some products, there is significant need for an independent firm that can source, due diligence, market, structure, and back-office these products. Central Park Group intends to fill that need.
As opposed to the mutual fund industry's efforts to conjure up "hedge fund-like" products that seek to replicate non-correlated absolute return strategies, CPG's potential value to advisors is their ability to provide access to established best-of-breed alternative managers with desirable track records.