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Introduction

In today's dynamic financial landscape, alternative investments (or "alts") are playing an increasingly crucial role in asset management. Despite making up only around 20% of total assets under management (AUM), they generate nearly 50% of revenue. As technology and market access improve, a growing number of Registered Investment Advisors (RIAs) are exploring these opportunities to deliver more diversified and potentially lucrative returns for their clients.¹

What Are Alternative Investments?

Unlike traditional investments such as stocks, bonds, and cash, alternative investments cover a wide range of asset types. These include:

- Private Equity and Hedge Funds
- Cryptocurrency
- Private Credit
- Real Estate and Commodities
- Art and Collectibles
- Venture Capital

Historically, alts were mainly reserved for institutional investors, given their complex structures and high entry barriers. However, recent advancements have made these investments increasingly accessible to individual advisors and retail investors.

Structuring Alternative Investments

RIAs can structure alternative investments in two primary ways:

1. Direct Investments: These allow clients to own assets outright, providing full control over management decisions and operations. Examples include private placements, real estate, collectibles, and special purpose vehicles (SPVs). While they come with greater risk, they often promise higher returns and the flexibility to tailor asset strategies.

2. Pooled Investments or Funds: This structure offers simplified access to alts, reducing the hurdles of high minimums and due diligence. Examples are venture funds, interval funds, private REITs, and credit funds. Pooled investments often provide greater transparency and regulatory oversight, making them an attractive option for advisors who want a more streamlined approach.

Mainstream vs. True Alternatives

When investing in alts, it's essential to distinguish between "mainstream" and "true" alternatives:

- Mainstream Alternatives: These are widely accessible and include more liquid investments like non-traded REITs and managed futures. They are often more correlated with public markets, making them suitable for risk-averse investors but generally offering lower returns.

- True Alternatives: These alts are less correlated with public markets and include higher-return assets like local real estate and infrastructure funds. They are typically more complex, require higher minimum investments, and are better suited for long-term, high-net-worth investors. However, they offer unique benefits such as inflation protection and alignment with specific megatrends, like sustainability.

Accessing Alternative Investments
RIAs have several avenues to access mainstream alternatives, such as custodian platforms or well-known asset managers like Blackstone. For more exclusive opportunities, finding "true" alternatives has historically been more complex. However, innovative platforms are emerging to simplify this process.

Atlas by AET
Atlas is a cutting-edge, custodian-backed marketplace designed specifically for RIAs to access "true" alternative investments. It offers features like:

- Direct connections to fund managers
- Customizable deal menus for your firm
- Performance tracking and management
- Seamless integration with your Turnkey Asset Management Program (TAMP)

Atlas streamlines the deal discovery and management process, allowing advisors to focus on delivering value to their clients.

Integrating Alts Into Your Practice
To effectively incorporate alternative investments into your advisory practice, consider leveraging platforms like Atlas for simplified access and enhanced deal flow. For a tailored consultation on how to get started with alts, connect with Steve Larsen, CPA, CFP®, at Atlas by AET.

Contact Information:
- Steve Larsen, CPA, CFP®
- Email: steve.l@aetrust.com

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Sources:

1: January 2024: The Next $20 Trillion in Alternative Investments