Alternative Investments Offered Online03.28.2014
An online marketplace for alternative investments, including hedge funds and private placements, aims to make it as easy to shop online for non-traditional investments as it to shop for books or iPads.
Launched in September 2013, FNEX.com provides accredited investors, investment advisors, family offices and institutions access to private investment opportunities offered by investment banks and funds across the United States. The distribution platform lists offerings and provides investors with the necessary tools to educate themselves on alternative investment opportunities.
“We are consolidating a very ad hoc and fragmented marketplace, which on an annualized basis is actually 40% larger than the public equities market,” said Todd Ryden, CEO of FNEX. Especially today, when we’re seeing this huge appetite for alternatives, people are looking for this type of platform.”
High net worth investors are increasing their exposure to alternative investments and pulling cash off the sidelines to do it, according to a new study on trends in non-traditional investing from MainStay Investments. However, a large percentage of investors still require more education and guidance to capitalize on the opportunity.
“Allocations into alternatives are growing as HNW investors are taking a closer look at their investment returns and diversification goals, and learning how alternatives can fit into a smart asset allocation strategy,” said Stephen Fisher, president of MainStay Investments, in a statement. “However, with 39% of respondents reportedly lacking confidence in their knowledge of alternatives, there’s a real opportunity to bridge the information gap.”
Under an agreement between FNEX and Pensco Trust Co., a self-directed IRA custodian, Pensco clients and their advisors can access FNEX.com, and investors and financial advisors who custody with Pensco will be able to source, review and invest in a variety of alternative investments.
“What we’ve been able to do is consolidate on one platform issuers that offering a particular alternative with an integrated virtual deal room through which investors can actually pay for the transaction by accessing their self-directed IRA or their custodian account,” said Ryden.
Advisors with a custodial account at Pensco can source the hedge fund and pay for the deal, with all the documentation provided through the virtual deal room directly to Pensco, which then directs the flow of funds. “It’s about as transactional as anything is in the alternative world,” Ryden said.
Brad Walker, product manager at Pensco, said in a statement: “FNEX.com is an outstanding and user-friendly resource that will help lead the way investors’ access and engage in the alternatives marketplace. We are thrilled to join forces with FNEX on this in order to offer our clients more ways to identify, review and invest in a full range of alternative assets.”
The online marketplace concept is attractive for startup funds that are usually under the radar of the large brokerages.
“What we have found is there’s a very big appetite for the middle market alternatives,” said Ryden. “These are the type of funds that can’t get distribution under the major RIA platforms. The guys sitting at the big firms don’t have time to bother doing diligence on a $300,000,000 fund that only has a limited amount of distribution. Advisors, family offices, even institutions are coveting this middle market space where the managers are outperforming.”
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