Outsourced CIO Model Benefits Advisors

Terry Flanagan

Circle Squared Alternative Investments, a provider of outsourced CIO services specializing in alternative assets, has formed a partnership with Strategic Capital Alternatives, a $1.5 billion money management and investment consulting firm that provides customized investment portfolio models and operational platforms to independent registered investment advisors.

The partnership seeks to empower advisors who work with SCA to capitalize on an investment model long employed by institutional investors – the outsourcing of highly specialized CIO-level analysis – but just now becoming available to independent financial advisors.

SCA offers streamlined technology for independent advisors, including turnkey asset management portfolios (TAMP) that adopt a multidimensional approach to investing by embedding alternative opportunities.

“We had this vision for Circle Squared when we started to build the company to create an alternative investment advisory service that could work in conjunction with advisors,” Jeff Sica, founder and CIO of Circle Squared, told Markets Media. “The ideal scenario for us was to link up with a firm that has the technology to initiate a TAMP. SCA was a firm that met those requirements for us, so they give us the ability to work with the advisors either bringing alternative methods to them directly or allowing them to integrate alternative methods through the TAMP.”

A TAMP enables advisors to gain access to managed account services that allow them to offload research, portfolio construction, rebalancing, reconciliation, performance reporting, and tax optimization and reporting.

“A TAMP is basically the technology that allows advisors to utilize our model,” Sica said. “Our models are very much in line with the endowment theory, which means we use certain percentages of alternative investments in combination with traditional investments. The TAMP allows us to do that through a more automated fashion.”

The outsourced CIO model is a response to advisors’ recognizing they are better at gathering assets than managing them. Circle Squared us focused on specialized illiquid and liquid alternative investments, an asset class which many advisors and their clients are unfamiliar.

“Our process is as much an educational process and a due diligence process on alternative as it is a transactional process,” Sica said. “We want to be viewed as an educational portal that allows advisors to learn more about alternatives with the average advisor having less than 5% through alternatives. There’s a lot of information they need to have in order to change the cultures in which they manage money.”

Sica said that non-correlated hedge funds are going to see a return of assets next year, and that real estate is going to continue to do very well, especially income producing real estate. “We think that theme is going to continue to persist next year and accelerate as time goes on,” he said. “The equity market is going to lose its attraction in my opinion in 2015.”

SCA gains immediate access to Circle Squared’s management team to help advisors better understand and communicate to their clients the role and advantages of alternative investments in a portfolio. CSQ’s team will also provide advisory services on a stream of vetted alternative opportunities to SCA’s investment committee for consideration.

“Circle Squared is an ideal partner because of their dedicated commitment to and experience in alternative investments,” said Timothy Feehan, CEO of SCA, in a release. “Partnering with an outsourced firm devoted entirely to alternatives allows us to immediately take advantage of their deep knowledge in building an alternative slice into individual portfolios.”

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