“RIAs perform the most sophisticated due diligence,” Marc Zeitoun of Guggenheim flatly stated in a conversation during the Schwab Impact conference in San Francisco. Zeitoun was talking about how his firm has long been an educator of advisors when it comes to the inside baseball of alternatives and their role in client portfolios.
“Alternatives” have been on some advisors’ investment radar screens, and that interest has grown since the financial crisis, which has also driven advisors’ increased interest in doing their own due diligence.
Sure, “education” is sometimes code for salesmanship, but advisors are not fools: You can clearly see the difference between a sales pitch and true education. In the 12 years I’ve been at Investment Advisor, we’ve spotlighted a mutual fund each month, but I would never believe that you would invest in one of those funds on your clients’ behalf merely because we think a fund manager is performing well or has an interesting story to tell. That’s where your due diligence begins, not ends.
Words can illuminate or obfuscate, and nowhere is that more obvious than when it comes to evaluating an alternative investment. At the same Schwab show, we convened a panel of alternatives experts—Andy O’Rourke and John Cadigan of Direxion Funds; Bob Worthington of Hatteras Funds; Brian Watson of SteelPath; and Rick Lake of Aston/Lake Partners. Yes, they are advocates for their own vehicles and the space itself, but they spoke in an objective way on how advisors view and evaluate alternatives (see an extended report at AdvisorOne).