The latest investment report from KKR sheds light on a wide range of investment prospects in the current economic scenario, which is marked by unpredictable global growth, moderately high inflation and interest rates, and a slower rate of economic advancement. Historically, investments in infrastructure and real estate have been lucrative and effective in hedging against inflation, especially as interest rates return to standard levels. Moreover, KKR's analysis indicates that private equity and infrastructure investments are poised for significant growth, given that they historically outperform during periods of volatility in public markets. Although inflation has recently decreased, significant structural hurdles in the economy remain. KKR suggests that investors may need to broaden their portfolios into alternative investments to achieve the returns typically expected from a traditional 60/40 portfolio over the coming five years. The current period may present an advantageous opportunity for repositioning, as proactive strategies during market fluctuations have often yielded long-term benefits for investors.
"Today, many investor portfolios still resemble the traditional 60/40 portfolio, but investors are increasingly looking to enhance their portfolios with Alternatives to achieve their investment objectives in this new macroeconomic regime."
KKR
Private Funding Pulse Check
Machinery Partner, a wholesale machinery company helping small businesses buy and finance heavy equipment, has secured $8M in a Series A funding round joined by Chicago, IL-based Pritzker Group
In a recent Seed round, IPGL Holdings participated in a $6.8M investment in Sunsave, a company making solar and energy storage accessible to all households
Saban Capital Group has participated in a $30M Series B funding round for MineOS, an operating system for Data Privacy, Governance and Compliance
Wipro Ventures has engaged in a $20M Series A investment in Kognitos, a San Jose, CA-based SaaS platform utilizing generative AI for natural language process automation
Survey Finds Advisors Allocating More to Alternatives, Expecting Further Growth
A recent survey by alternative investment platform, CAIS and consultant Mercer found growing interest in alternative investments among financial advisors. The survey of 260 independent RIAs, broker/dealer affiliates, family offices and other advisors found that over 60% currently allocate between 6-25% of client portfolios to alternatives. Additionally, more than 80% expect their usage of alternative investments to increase within the next year. The advisors are increasingly turning to alternative asset classes such as real estate, private equity, and private debt to diversify portfolios, enhance returns, and supplement income. Over half of the advisors cited high administrative and paperwork demands as obstacles of alternatives, alongside liquidity concerns and challenges with due diligence. Still, advisors see alternatives as helpful for meeting client goals and winning new business. The mounting demand is leading more asset managers to create investment vehicles accessible to accredited and non-accredited investors alike. With the assistance of strategic partners, the adoption of alternative investments in the wealth management industry seems destined for substantial growth as it gains momentum.
"What’s going to be one of the drivers of that move is that you can see historically, investors have been qualified purchasers. But there is large chunk of advisors covering clients in the $1 million to $5 million range...You can see the demand. More asset managers are creating vehicles and wrappers for high-quality alternatives and we are putting those on our platform. That’s propelling some of the growth we are seeing."
New data from State Street's Private Equity Index reveals that amidst a turbulent macroeconomic climate, private credit funds are delivering superior returns for investors compared to private equity. The index shows private debt funds generated 2.61% returns for limited partners in Q2 2023, surpassing the 2.29% returns from buyout funds over the same period. This outperformance has held steady since early 2022 as floating rate interest allows private credit funds to keep pace with central bank tightening, while private equity firms struggle with falling portfolio valuations that hinder exits and distributions. However, there are concerns that highly leveraged borrowers could default on loans from aggressive private lenders. Still, private credit continues attracting more fundraising relative to equity, suggesting investors see the asset class as lower risk despite economic headwinds.
"It reflects the direction of the market...So many factors are pushing private credit allocations upward."
Ian Milton, Mercia Capital Partners
LPL Unveils 'Private Wealth' Unit to Compete for Ultra-High Net Worth Clients
LPL Financial recently unveiled a new 'Private Wealth Management' channel aimed at financial advisors who generate at least $2M in annual revenue and service high net-worth clients. The move allows LPL to compete with wirehouse firms that have traditionally dominated the elite wealth management space. To be eligible, advisors must work predominantly with households boasting over $5M in investable assets. They will join LPL as employees rather than independent contractors. In return, LPL promises increased payouts up to 70% of revenue, avoiding issues like mandatory deferred compensation. LPL has brought on a dedicated team to provide private wealth advisors with access to exclusive alternative investments. The goal is to attract corner office wirehouse teams seeking more flexibility and control over their practices. LPL likely hopes the new channel will push them further upmarket, as their average advisor revenue lags behind competitors. The unit is led by a former First Republic Bank wealth executive, Anna Howard, who joined the firm in June. Early signs suggest positive momentum, with LPL executives recently citing strong asset recruitment thanks to increased affiliation options.
"The diversity of our different models continues to help us attract a diverse set of advisors and advisors that, quite frankly, do more and more advisory when they join LPL."
The Harvan McKenzie Wealth Partners group joined Rockefeller Capital Management, overseeing $500M in client assets
James A. McKenzie started his career in 1998 at Citigroup Global Markets and joined Merrill Lynch in 2012. He and his team ranked highly on recent Forbes' lists
The addition builds on Rockefeller's recruiting momentum, after recently landing teams from UBS and Wells Fargo with $7.7M and $3M in assets respectively
Rockefeller has consolidated some of its regional divisions, folding the Southwest with Pacific Northwest and North Atlantic with the Midwest, streamlining management as the firm continues expanding (AdvisorHub)
Written by:
Andrew Popp | Sr. Research Associate
FINTRX delivers an industry-leading suite of private wealth data and research solutions to the alternative investment space and private capital markets. Engineered to help clients identify and access family office and RIA capital intuitively, the FINTRX platform ensures accurate and updated data and research on 850,000+ private wealth records globally. To subscribe to our newsletter and see previous versions click below.
