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To attract RIAs, Pershing turns to alternative investments

BNY Mellon
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Interest in alternative investments is rising as advisors look for new ways to generate alpha in an era dominated by index investing.

BNY Mellon Pershing wants to make access to these products easier with a pair of new integrations that automates document workflows between Pershing’s custodian platform and two prominent alternative investment sponsors: CAIS and iCapital Network. By removing the manual work required, Pershing is lowering the barriers that keep advisors from investing in private equity, private credit and hedge funds, says Rob Cirrotti, managing director of global strategy and product management.

Advisors are increasingly allocating client assets in alternatives for diversification and uncorrelated returns, Cirrotti says. Offering easy access to these products can be a competitive advantage for attracting advisors to Pershing’s custodian platform, he says, adding that CAIS and iCapital work with other custodians, but only Pershing is using a digital integration to automate the process.

“Advisors and investors are increasingly looking to access private markets given the decline in publicly traded companies over recent years,” Cirrotti says.

Interest is particularly high among RIAs, adds Christina Townsend, Pershing Advisor Solutions’ head of relationship management, consulting and platform strategy. RIA account balances on Pershing’s existing alternative investment network have doubled over the past three years, Townsend says.

While Pershing will continue to support its alternative investment network (Cirrotti says it has investment managers that aren’t on CAIS or iCapital), the two providers offer features that Townsend says are attractive to independent advisors, such as a curated menu of products, due diligence, research and education. CAIS and iCapital can also pool investors together to reduce minimums.

“We are focused at expanding our addressable market, especially in the RIA channel,” Townsend says. “In the higher net-worth space, alternatives are a differentiator … This is the first in a number of steps we are taking to further relationships with these third-party alternative investment platforms.”

Though Pershing is first with the digital integration, iCapital Network COO Tom Fortin says automated workflows will become commonplace across the custodial market as alternatives catch up with the rest of the investment community.

“It’s a testament to Pershing’s foresight in straight-through processing being the standard of the future,” Fortin says. “We believe other custodians will follow as it becomes more well-known.”

The number of alternative investment purchases on Fidelity’s platform by RIAs has doubled since 2016, and the firm is investing in improving the advisor experience, according to a spokesperson. Most recently, Fidelity launched a new front-end order entry tool for alternative investments, the spokesperson says.

Advisors can access CAIS and iCapital through Fidelity’s Wealthscape platform using a single sign-on. Charles Schwab also provides RIAs access to third-party platform sponsors, including CAIS and iCapital, on its alternative investment marketplace.

Pershing is looking at how it can leverage other parts of its business to hold on to its lead with alternative investing. Its Prime Services unite, for example, provides securities lending and financing to alternative investment managers, and BNY Mellon serves as a fund administrator and asset custodian for credit, hedge, private equity and real estate funds.

By bringing this together with third-party sponsors, Pershing can bridge the RIA and alternative investment communities stronger than anyone else, Townsend says.

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