Investments Roundup: Sanctuary, State Street, Macquarie, Bernstein And More

Q&A With Patrick McGowan Of Sanctuary Wealth – Our Investments Solutions Leader Of The Month – And Product News Featuring Vanguard, State Street, Macquarie, SoFi, CION Ares Management, Bernstein, Cerulli, HFR And J.P. Morgan.
Patrick McGowan, Managing Director and Head of Alternative Investments, Sanctuary Wealth
Patrick McGowan, Managing Director and Head of Alternative Investments, Sanctuary Wealth
Chris Latham, Managing Editor, Wealth Solutions Report
Chris Latham, Managing Editor, Wealth Solutions Report

In this edition of the Investments Roundup, we speak with our newest Investment Solutions Leader of the Month, Patrick McGowan, Managing Director and Head of Alternative Investments at Sanctuary Wealth, who discusses how advisors can better use alts with their clients.

Other entries include Vanguard appointing Salim Ramji as CEO, the launch of the State Street Global Climate Transition Equity Fund, the launch of the Macquarie Focused Large Growth ETF, the CION Ares Diversified Credit Fund surpassing $5 billion, SoFi partnering with Templum on alternative investments technology and infrastructure, industry leaders speaking at the upcoming Bernstein 40th Annual Strategic Decisions Conference, Cerulli finding that DCIO asset managers remain skeptical of private market investments, HFR reporting that macro hedge fund strategies took the lead in April and J.P. Morgan’s Clare Hart winning Morningstar’s “Outstanding Portfolio Manager” award.

Larry’s Take

Larry Roth, CEO, Wealth Solutions Report
Larry Roth, CEO, Wealth Solutions Report

With alternative investments increasingly in focus for mass affluent wealth management clients, advisors need to find the most relevant tools for them to analyze potential alts strategies. YCharts, one of the plethora of tools available to advisors, also has extensive resources for asset managers.

Its May 10 blog post, titled “How to Use YCharts to Drive Advisor Interest in Your Alternatives,” covers how asset managers can educate advisors, how advisors can build model portfolios with alts, as well as how advisors can see a correlation matrix of their newly built portfolio or view it on an efficient frontier to find allocations for their clients.

In addition, YCharts and other portfolio management tool providers regularly offer market insights. For example, as WSR recently covered, YCharts released a new report titled, “How Do Presidential Elections Impact The Market? The Financial Advisor’s guide to answering election questions.” Of course, no one tool will be best for every advisor – so test out as many different providers as you can.

If you would like to discuss this Larry’s Take further, including how these trends might impact your business, please contact me at larry.roth@rlrstrategicpartners.com.

Indianapolis-based Sanctuary Wealth recently acquired Portland, Oregon-based tru Independence. Together, the combined enterprise will support approximately 120 independent wealth management firms that manage over $42 billion in client assets across 30 states.

Patrick McGowan, Managing Director and Head of Alternative Investments at Sanctuary, oversees a team responsible for the firm’s nearly $1 billion private markets platform, leading product origination, due diligence, selection and the private markets model portfolio implementation process. He previously worked at Azimut Alternative Capital Partners, Invesco, the Carlyle Group, iCapital and OppenheimerFunds.

And now for our Q&A with McGowan.

WSR: How can financial advisors make better use of alternative investments to enhance client portfolios?

Patrick McGowan, Managing Director and Head of Alternative Investments, Sanctuary Wealth
Patrick McGowan, Managing Director and Head of Alternative Investments, Sanctuary Wealth

McGowan: Financial advisors can enhance client portfolios by thoughtfully increasing allocations to alternative investments, as they provide opportunities for improved diversification, better risk management and increased resilience to market volatility. By leveraging control and operational expertise, private market funds can offer attractive returns and reduced correlation with public markets.

Strategic allocation to these funds can help build a portfolio that is not only more robust but also capable of capturing an illiquidity premium. However, it’s crucial to carefully select managers and structure the portfolio to align with each client’s objectives and timeframes, ensuring that the benefits of private market investments are fully realized while managing any liquidity constraints.

WSR: What macro forces or market trends should advisors be aware of regarding the performance of alts in 2024?

McGowan: In 2024 and beyond, advisors should monitor key macroeconomic factors like rising interest rates, inflation trends and recessionary risks that could impact the performance of alternative investments.

Geopolitical tensions, regulatory changes and market liquidity conditions may stress test the plethora of managers that have entered the wealth space. Additionally, advisors should evaluate how increased competition among funds might affect future returns in this space.

WSR: How does Sanctuary make alts available to the advisors on its platform?

McGowan: At our firm, we take a rigorous approach to evaluating and selecting alternative investments for our advisors and asset management group to utilize in portfolios. Our dedicated alternatives team conducts thorough due diligence, analyzing quantitative performance data as well as qualitative factors like the management team, strategy, operations and risk controls.

Robust governance controls from investments, compliance and legal perform oversight of the investment team, ensuring we uphold our fiduciary duty. This allows our advisors to thoughtfully incorporate alternative investments to enhance portfolio diversification, manage risk, and potentially boost returns for clients based on their specific goals and circumstances.

2. Vanguard Appoints Former BlackRock Executive Salim Ramji As CEO

Salim Ramji, CEO and Board Member, Vanguard
Salim Ramji, CEO and Board Member, Vanguard

Vanguard’s Board of Directors appointed Salim Ramji as the new CEO and a Board member, effective July 8. Ramji succeeds Tim Buckley, who is retiring and stepping down as Chairman and CEO. Ramji has more than 25 years of experience in investments, capital markets and wealth management.

Most recently, he served as Global Head of iShares and Index Investing at BlackRock. Before that, Ramji was the Head of U.S. Wealth Advisory and Global Head of Corporate Strategy at BlackRock. Prior to BlackRock, he was a Senior Partner at McKinsey & Company in charge of its Asset & Wealth Management Practice.

“I am drawn to Vanguard because of the firm’s clarity and consistency of purpose and am very excited to get to work and partner with the outstanding leadership team to lead the company into the future,” Ramji said. “The current investor landscape is changing, and that presents opportunities for Vanguard to further its mission of giving people the best chance for investment success, which is more relevant today than at any time in the firm’s five-decade history.”

3. State Street Launches Climate Transition Fund For Investors With Access To Europe

Viki Farmaki, Senior Analyst, State Street Global Advisors
Viki Farmaki, Senior Analyst, State Street Global Advisors

State Street Global Advisors launched the State Street Global Climate Transition Equity Fund, which invests in a concentrated portfolio of companies targeting a potential transition to a low-carbon economy. The SFDR Article 8 fund is designed for investors seeking to integrate climate considerations while generating alpha through a forward-looking, fundamental approach.

The fund will hold 30 to 40 companies. The selection process includes an evaluation of their transition planning and commitment to emissions reduction. The fund will be available to investors with access to Austria, France, Finland, Germany, Ireland, Italy, Luxembourg, Netherlands, Sweden, the UK and Spain. The fund is co-managed by Esther Baroudy and John Flynn, who also manage State Street’s Global Opportunities Equity Fund.

“Our experienced analyst team uses proprietary climate research to help identify companies which have credible, well thought-out plans for climate transition and emissions reductions,” said Viki Farmaki, Senior Analyst with the Fundamental Growth and Core Team at State Street Global Advisors. “This, alongside our bottom-up fundamental analysis, is instrumental in identifying companies which we believe are likely to outperform in an anticipated transition to a lower carbon economy.”

4. Macquarie Focused Large Growth ETF Debuts On NYSE Arca

Anthony Caruso, Head of ETF Strategy, Macquarie Asset Management
Anthony Caruso, Head of ETF Strategy, Macquarie Asset Management

Macquarie Asset Management launched the Macquarie Focused Large Growth ETF (LRGG) on the NYSE Arca. The ETF is managed by Bradley Klapmeyer and Bradley Angermeier. Their concentrated portfolio uses qualitative fundamental research and quantitative quality analysis.

Qualitative aspects focus on a research-driven, bottom-up approach to assess industry structure, competitive advantage, management strength and long-term potential. Quantitative analysis emphasizes the level and trajectory of key quality characteristics including returns on capital, asset efficiency, margins, cash flow, stability and organic growth.

“By adding LRGG to our platform, we’re excited to bring the expertise of our large-cap growth team and their capabilities to the ETF market,” said Anthony Caruso, Head of ETF Strategy, Macquarie Asset Management. “This ETF complements our existing BILD, PWER and STAX solutions, as we offer a diverse suite of solutions to meet the evolving needs of today’s investors.”

5. CION Ares Diversified Credit Fund Surpasses $5 Billion In AUM

Mark Gatto, Co-CEO, CION Investments
Mark Gatto, Co-CEO, CION Investments

CION Ares Management (CAM), a joint venture between affiliates of CION Investments and Ares Management, announced that the CION Ares Diversified Credit Fund (CADC) recently surpassed $5 billion in assets under management (AUM). CADC invests in a diversified pool of illiquid and liquid credit investments in a continuously offered interval fund structure.

The fund leverages the operational resources, infrastructure and origination network of Ares. It is distributed through RIAs, independent broker-dealers and wirehouses. CION Investments also sponsors CION Investment Corporation, a publicly listed business development company that manages approximately $2 billion in assets. As of March 31, the Ares global platform had approximately $428 billion of AUM.

“Our consistent growth in fundraising has scaled rapidly as investors increasingly incorporate alternatives into their portfolio allocations, and we are delighted to reach the $5 billion milestone in assets under management,” said Mark Gatto, Co-CEO of CION. “CADC offers the opportunity for several benefits including income, stability and lower portfolio volatility through diversification away from public markets, and this combination has proved powerful in helping investors reach their goals.”

6. SoFi Partners With Templum On Alternative Investments Tech And Infrastructure

Anthony Noto, CEO, SoFi
Anthony Noto, CEO, SoFi

SoFi, a digital personal finance company, partnered with Templum, an operating system for private markets and alternative assets, on technology and infrastructure capabilities to expand retail investor access following the January launch of SoFi’s alternative investments platform.

The recently launched platform provides access to commodities, foreign currencies, private credit, hedge funds, venture capital and real estate through funds run by asset managers including ARK Invest, Carlyle, Franklin Templeton and KKR, for low account minimums. Templum strives to unify private market infrastructure, investment opportunities and investor capital into a single solution for private securities and alternative assets.

“At SoFi, we spend every day working to empower our 8 million-plus members to get their money right so that they can achieve financial independence – and investing is an important part of that – but unfortunately, many valuable investment vehicles have been left inaccessible to the everyday investor,” said Anthony Noto, CEO of SoFi. “We recently changed that paradigm by expanding access to alternative investments.”

7. Bernstein Hosts 40th Annual Strategic Decisions Conference, Adds Board Member

Seth Bernstein, President and CEO, AllianceBernstein
Seth Bernstein, President and CEO, AllianceBernstein

Bernstein’s 40th Annual Strategic Decisions Conference will feature an array of presentations from major leading companies at the New York Hilton Midtown from May 29 to May 31. Scheduled participants include J.P. Morgan Chairman and CEO Jamie Dimon, State Street Chairman and CEO Ron O’Hanley, Blackstone President and COO Jon Gray and KKR Co-CEO Joseph Bae.

AllianceBernstein, a global investment firm with $737 billion in AUM, also announced that Bruce Holley joined the Board of Directors as an independent member, and will sit on the Audit and Risk Committee. Holley is a Managing Director of Alvarez & Marsal’s Financial Services Industry practice. He previously was a senior executive at Accenture and Boston Consulting Group.

“As an accomplished financial services leader with 30 years of industry experience, we are pleased to add Bruce to our Board,” said Seth Bernstein, President and CEO of AllianceBernstein. “Bruce’s extensive knowledge of the wealth and asset management industry, combined with his proven leadership, will help advance our firm forward.”

8. Cerulli Finds DCIO Asset Managers Remain Skeptical Of Private Market Investments

Kurt Cerulli, CEO, Cerulli Associates
Kurt Cerulli, CEO, Cerulli Associates

Cerulli Associates released its latest edition of The Cerulli Edge—U.S. Monthly Product Trends, which analyzes data as of March for mutual funds and ETFs, and assesses institutional investor interest in alternative investments. After unusual inflows in February, mutual funds returned to small outflows of $11.2 billion. ETFs had strong inflows of $102.5 billion in March and approached $9 trillion in assets.

The report also found that significant growth in private markets activity by institutional and retail investors has not been accompanied by similar appetite by defined contribution investment-only asset managers. More than 50% of DCIO asset managers that Cerulli surveyed said they had not added two of the largest private market fund types to their offerings.

“As alluring as an investment such as private equity (PE) may appear to the average institutional-level investor, alternatives are not yet compatible with defined contribution (DC) plan sponsor incentives and regulatory requirements, due to their relative illiquidity and opaque nature,” according to the report.

9. HFR: Macro Hedge Fund Strategies Take Lead In April Amid Broad Headwinds

Kenneth Heinz, President, HFR
Kenneth Heinz, President, HFR

HFR found that hedge funds gained in April as equities fell, with macro strategies taking the lead. The HFRI Macro Asset Weighted Index increasing by 2.6%, raising year-to-date performance to 9.8%. The HFRI Asset Weighted Composite Index rose 0.9%. The HFRI Relative Value (Total) Index also notched an estimated 0.3% gain for the month, with a year-to-date return of 2.8%.

On the negative, the HFRI Fund Weighted Composite Index (FWC), which is equally weighted instead of asset weighted, fell 0.6%. The HFRI Equity Hedge (Total) Index fell an estimated 1.6%, lowering the year-to-date return to 3.4%. The HFRI Event-Driven (Total) Index fell 1.9%. The HFRI Diversity Index also fell an estimated 0.4% while the HFRI Women Index fell 0.2%.

“Hedge funds posted impressive gains in April led by macro strategies and the industry’s largest, most established funds as financial markets experienced a crucial inflection point, reversing from the dominant risk-on sentiment in 1Q to a powerful risk-off sentiment as investors positioned for persistent inflations, elevated interest rates and continued extreme

levels of geopolitical risk,” said Kenneth Heinz, President of HFR.

Wirehouse / Big Bank Activity

10. J.P. Morgan’s Clare Hart Wins Morningstar ‘Outstanding Portfolio Manager’ Award

Clare Hart, Managing Director, Portfolio Manager, U.S. Equity Group, J.P. Morgan
Clare Hart, Managing Director, Portfolio Manager, U.S. Equity Group, J.P. Morgan

Morningstar named Clare Hart, a Managing Director for the U.S. Equity Group at J.P. Morgan, as the winner of the 2024 U.S. Morningstar Awards for Investing Excellence “Outstanding Portfolio Manager.” The award goes to professionals possessing investment skill and who align with the interests of the strategies’ investors.

Clare Hart began running JPMorgan Equity Income in August 2004. Since then, the fund earned a 9.4% annualized gain, beating the large value Morningstar category and the Russell 1000 Value Index by over a percentage point. Hart has focused on established companies that pay reliable dividends and expose shareholders to yield-rich, value-leaning sectors.

“In Clare’s two-decade tenure leading JPMorgan Equity Income, she has employed a prudent investment approach with investors’ best interests in mind,” said Todd Trubey, Senior Manager Research Analyst at Morningstar. “Clare built a fund that is easy to own and has navigated bear markets well. With her retirement this fall, she is leaving a legacy marked by exceptional stewardship for investors.”

Chris Latham, Managing Editor at Wealth Solutions Report, can be reached at clatham@wealthsolutionsreport.com.

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