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Pitching alts to RIAs online

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Using alternative investments in client portfolios is trending, but it's an option out of reach for a number of advisers because of high costs.

The solution is to make them available online — and fund firms should outsource to keep distribution costs low, says Mike Perry, Nuveen's head of alternative strategies.

"What it does is eliminates all of the extra work that a RIA may have to go through to access a best-in-class alternative strategy, and instead allows them to go online and review a digital pitch book," Perry says. "They'll see all of the data room elements electronically, and then they can go to execute electronically."

A recent addition to Nuveen, Perry says his time at Merrill Lynch and UBS Wealth Management made him recognize the need to deliver the "offerings in a more efficient way." That's why the asset manager decided to partner with alts fund platform provider Artivest.

"I have become familiar with the cost dimensions of the business, and the general pressure on wealth management," Perry says. "Half the battle was making it easier for the adviser, because the easier it is for the adviser to do the business, the more of it they are going to do."

What led to the partnership with Artivest?
We have over $140 billion of alternative investments. And through our acquisitions at Nuveen, one of our challenges has been how to get all of those capabilities to our wealth channel.

I led the effort from conception, to building out the capabilities, to where we are now. It was clear to me, even before I joined, that there was no real access to largely institutionally distributed funds and capabilities. I also had experience running and managing large alternative investment platforms, so I recognized that we could either increase the infrastructure in the middle and back office to do the things necessary to service this market, or we could find an alternative solution.

The firm was comfortable with an outsourced solution?
We were basically leveraging a third party provider that lowered the cost versus having to spend potentially millions of dollars, and a lot of time, to have internal technology professionals do it who may not be an expert in this type of service.

So, having worked in large organizations in the past, I know how long it takes. I know how expensive it can get and you're not really dealing with experts in how to deliver alternative funds. Having looked across the landscape here, I think we have seen the technology advance enough where we could outsource the solution.

What have been some of the immediate benefits?
One huge advantage is that we really look for is how this going to help our clients — the RIAs and the smaller financial intermediaries — that can't build their own alternative private fund platforms. This allows them to easily access the investment strategy that they might have not been able to access in the past. It would take a lot of administrative expense to manage that.

This eliminates all of the extra work that an RIA may have to go through to access a best-in-class alternative strategy. It allows them to go online and review a digital pitch book. They'll see all of the data room elements electronically, and then they can go to execute electronically via DocuSign.

It's essentially all online and it allows them to organize their clients. It also allows them to give clients rich information about what the status may be, versus often times today there's a lot of manual administration of subscribing to a particular fund. This makes it much easier and frees them up to do what they want to do, which is provide more advice to their clients. They don't want to spend the time administering the business.

How has the partnership affected the Nuveen's distribution model?
The providers in this space, like Artivest, are new businesses, and I would say that the collaboration we had with them really is anchored around the fact that we are able to white label our technology solution with a partner that really knows how to help deliver these types of strategies and partnerships. I would say that not every firm out there has that model.

What we found was that most of the models out there were still oriented around distribution. In other words it was less about the technology and its use, and more about just helping our single strategy of smaller hedge funds and private equity firms with access to that channel. But there is still a distribution cost for access to that channel and that was the model for a lot of these firms.

What we're doing is actually allowing us to take out more cost because it's really not about distribution. We have our own in-house people and we can actually deliver this solution as if you were coming in like our other institutional clients. So the model that we have with Artivest has been able to neutralize costs and provide really great capabilities to these advisers.

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