Alt Investments
CAIS Taps Demand For Wider Alternative Investment Access

Everyone seems to be talking about private market investing - "alternative investment" - these days. A need for advisors and clients is having good seats at the table and being educated about the benefits and traps that arise.
As alternative investments such as venture capital, private
equity and credit are becoming more visible and talked about, it
is becoming much easier to tap into these fields.
A word that comes up time and again these days is “access.” Once
the preserve of pension funds, sovereign wealth funds and the
biggest family offices, “alternatives” are said to be getting
more “democratized,” and technology platforms are a big part of
why this is happening. Ticket sizes don’t have to be as big if
groups of investors can aggregate quickly to combine their buying
power; it gives them the ability of a large institution to
negotiate on price.
One such organization making a dent in this particular universe
is CAIS, a US-based
investment platform providing access to (and education on)
alternative funds and products. CAIS has offices in New
York, Los Angeles and Austin.
As with other tech-driven business, its model has benefited from
the pandemic’s acceleration to digital and virtual communications
platforms.
“The number of financial advisors putting alternative
investments into portfolios for the first time is
skyrocketing,” Matt Brown, CAIS chief executive, told Family
Wealth Report in a recent call.
CAIS has recently doubled in size as a result of a $50 million
equity investment from Eldridge, the Greenwich, CT-based private
investment house. It has more than 110 employees; it expects to
double again in the coming year.
Alternative investment is the main place where “Alpha” and
serious active management can be found, he said.
“Traditional asset management has largely disappeared. The 'new
active' is alternative investment.”
The reasons for the rise of alternatives are familiar:
ultra-low/negative interest rates have crushed yields on listed
stocks and government bonds; fewer firms are taking the IPO route
and more are staying private; and the illiquidity premium that
comes with private market investing is a clear attraction.
Knowledge of these areas is growing. ALTSMARK, a US software
solution firm for the private capital sector, earlier this year
said that more than a third of registered investment advisors
could be put out of business within a decade if they don’t
include alternative assets in their clients’ portfolios. Private
market investments - such as private equity and credit - have
exploded 30-fold from 2000 to $30.5 trillion today.
Brown said there has been a 67 per cent year-on-year rise in
total transaction volume on the CAIS platform: alternative
investment funds and products; the number of advisor firms/teams
transacting on the platform has surged 75 per cent; those
transacting via CAIS for the first time has skyrocketed 149 per
cent; and the number of funds traded has risen 95 per cent.
Brown said there are still cases of advisors who have not yet
advised clients about these asset classes, or put them into such
areas. However, that is changing fast. “Of those who are using
alternatives, the percentages in a portfolio are also going up at
a fast clip,” he said.
An important task for wealth managers and their clients has been
showing how alternative assets sit alongside the rest of their
investments. Being typically less liquid (although not always),
client reporting has been a challenge. There are firms such as
Canoe, Private
Client Resources and FundCount, working in the
space, which remains a big growth area. Another firm in the space
of building access, meanwhile, is iCapital, a New York-based
group that has been forging alliances with a group of banks and
wealth managers, and expanding into Europe, Asia, and other parts
of the world.
Brown discussed how CAIS’s use of custodians enables the platform
to show clients what their investments are worth and be “above
the line.”
“Historically, major custodians would not recognize or represent a client’s alternative investment holdings on client statements. Advisors would have to get their client’s holdings from each individual investment. This is not scaleable, especially for an RIA firm,” he said.
“CAIS sought to change that and make it operationally efficient
for financial advisors and their businesses. Through CAIS’
integration with the three major custodians, Fidelity, Schwab,
and Pershing, alternative investment holdings are now seen on
client statements, also known as 'above the line reporting,'”
Brown said.
He sees CAIS as an open arena, giving autonomy to those who use
the business platform, while creating an overarching structure.
In that sense, he said, it resembles modern businesses such as
AirBnB or Uber.
The business serves RIAs, multi-advisor platforms and independent
broker-dealers and regional banks. The numbers do a lot of the
talking: since inception, CAIS has processed more than $13
billion in total transaction volume with more than 4,200 advisor
firms/teams as members who oversee more than $2 trillion in
network assets.
The development of blockchain technology – distributed ledger tech most commonly associated with bitcoin – can help address reporting inefficiencies, as well as privacy and security, Brown added.