All Articles Finance The evolving market for direct investments

The evolving market for direct investments

The industry is working to adapt to changes in regulation and product structure.

2 min read


Keith Allaire Market Expansion Panel-1


Regulatory change is the overwhelming driver in the alternatives industry, and participants are grappling with issues from new fiduciary rules to proposed concentration limits. Simultaneously, the market is becoming more widely accepted as larger institutional sponsors enter the space and there is broader, wirehouse distribution of products.


As current participants adapt to changes, there are many opportunities to position your firm and products for the future, which was the topic of the session “A New Era is Upon Us: The Evolving Market for Direct Investment” by Keith Allaire, managing director at Robert A. Stanger & Co, and Mike Huisman, director of software development at DST Systems.


Current market conditions such as new entrants, changing regulation, low interest rates and high property values have many sponsors struggling to decide when to hold liquidity events, Allaire said. Liquidity events and thus fundraising have slowed, but insecurity about what product to offer next has many considering restructuring their offerings.


On the broker-dealer side, firms are working through higher compliance costs, increased liability exposure, reduced revenue and various cost structures. In response, many deals now address upfront costs and sponsors are expanding product lines.


One product gaining in popularity is interval funds, which appeal to a broader market since they are more liquid than some traditional alternatives. Since 2009, these funds have attracted $8.7 billion with 2016 on track to be the largest year to date, Allaire said.


In his presentation, Mike Huisman delved more in-depth on product trends, exploring how investors are putting their money to use and how demographics break down across the U.S. Overall, investors are shifting some money to interval funds, while the industry continues to attract new advisors to that asset class. To view his entire presentation, click here.


In 2017, Allaire predicts many of these trends to continue including sponsor product line expansions, increased institutional interest in the space, more frequent valuations and a slight expansion in REITs and business development companies.