I am no stranger to the independent RIA universe. In addition to being a former private wealth manager, my professional career has been largely devoted to the intersection of money management and venture finance.
I have worked with dozens of wealth managers and family offices that regularly evaluate and allocate to private venture investments. Although they represent a fraction of the RIA universe, they are invariably among the most successful of their peers. These wealth managers are the primary target audience of this column and the Venture Populist blog.
I regularly advocate that RIAs that possess the requisite mandate, means, and mindset should embrace private venture investments–for the benefit of both their clients’ portfolios and their practices. Yet the majority of independent wealth managers should best leave this sandbox to VCs and angel investors.
Assessing Your Private Venture Readiness
Does your advisory practice possess the rationale and the resources to advise clients in startup, early-stage, and other private venture investments? Your advisory practice may be uniquely qualified, if you consider;
Trait Number 1: You are in the business of wealth preservation and wealth creation. While this may seem like stating the obvious, without question the primary source of family wealth in America is the result of private enterprise and private venture investments characterized by their potential for positive asymmetric outcomes.
Trait Number 2: You embrace Modern Portfolio Theory. Despite its flaws, which I have discussed in this space before and which have become particularly apparent during the past two years, MPT does advocate diversification into non-correlated asset classes. One-off investments in private ventures are distinctly non-correlated to broader asset classes and major market indexes and have exhibited less of a tendency to correlate during negative black swan events.