Top 40 Under 40: Turning to Alternative Investments

No. 29: Thomas Kane

Firm: UBS

AUM: $647.37 million

Location: Chicago

Age: 37

Note: This profile is part of a special series devoted to On Wall Street’s Top 40 Under 40 ranking for 2012. Every day we take a look at an advisor who made the list to find out the secrets of their success.

“Most advisors will tell you that they’re not market timers,” says Thomas Kane. “In my opinion, if you’re not a market timer you should not be getting paid.”

Kane is not a traditional asset allocating value investor. Instead, he specializes in alternative investments, especially hedge funds, private equity and real estate. In those areas, he seeks a few attractive opportunities in which to place substantial amounts for his clients.

“My clients tend to fall into two categories,” Kane says. “Some are family offices with $1 billion or more to invest. They want my best idea, where they might put, say, $40 million or $50 million.”

Kane’s other type of client is likely to have a net worth in that $40 million to $50 million range. “For these clients, we can scale down our offerings,” Kane says. “They might be able to put $1 million or $2 million into the same investment opportunities we’re offering to the family offices, opportunities that otherwise might not be available to these traditional private wealth clients.”

Both types of clients have access to alternative investments that are not run-of-the-mill. “Recently, we’ve been focused on a European debt strategy,” Kane says. “We’re making loans and buying loans, including distressed loans. Our goal is to take advantage of dislocations in the European debt market.”

Are clients leery of what seems to be a high-risk investment approach? “My clients are very sophisticated,” Kane says. “Where others might see risk, they see opportunity. They can understand that we’re primarily investing in senior secured debt. This type of fixed-income has lower risk than the U.S. equity market, for example. These loans are on the debt side of the capital structure so the holders are the first to get paid, if things go wrong.”

Kane says this European debt strategy performed well in 2012 but he’s not putting more money there now. Instead, he’s moving on to other opportunities, such as master limited partnerships that have underperformed, selected mortgage-backed securities, and non-rated municipal bonds.