An Alternative Path to Success
Financial advisors who leave large name-brand brokerage firms to go independent don’t need to be reminded of the benefits of making the switch. But they also wrestle with the possible negatives of becoming independent. Kyle Kniffen shared his views on alternative investments for the third party wealth channel in a recent AdvisorHub cover story.
One major concern is whether they can give their clients the same level of financial sophistication they could provide at a firm with greater financial resources and a wider array of offerings. It’s a valid issue and one that Goldman Sachs Alternatives is addressing through its diverse portfolio of alternative investments being marketed to advisors across the country.
With the help of Goldman Sachs Alternatives, RIAs and other independent advisors can potentially enrich their clients’ portfolios with a range of private investments. The firm manages strategies across alternative asset classes including private equity, private credit, real estate equity, real estate credit, infrastructure and hedge funds.
“We have the ambition at Goldman Sachs to provide a broad range of independent advisors with access to alternatives,” says Kyle Kniffen, a Goldman Sachs managing director who oversees sales through the independent brokerage channel.
Advisors have long understood that some alternative investments can help dampen volatility in an investment portfolio because they have low correlation to traditional stock and bond markets.
Some alternatives have also delivered superior returns over the long term compared with traditional public investments. That’s an important selling point, given how well publicly traded securities and low-cost index funds have performed over the past decade.
With private equity, for example, investors can get access to private companies at different development stages, that may grow faster and offer more innovation and value creation than more mature public companies.
Over the past two decades, the number of privately held companies has grown significantly, while the number of publicly listed firms in the U.S. has fallen.* That’s because new companies are choosing to remain private for longer, often leveraging their capital to expand their businesses before going public. “Much of the growth and value that was previously generated post-IPO is now being built under private-market ownership,” according to the Goldman Sachs report.
Advisors who decide to tap into alternative investments for their clients can benefit from Goldman Sachs’ institutional expertise. The 155-year-old Wall Street firm has more than three decades of experience creating and marketing alternative investment to individual investors. The firm currently has $500 billion in alternative assets under management as of September 30, 2024.
While alternatives are often used by individual clients who have millions of dollars of investable assets, Kniffen says that Goldman Sachs Alternatives may now serve a broader range of clients.
One common criticism of private alternative investments is that investment lockup periods can extend to a year or longer. But Kniffen contends that these lockups are often necessary to provide a money manager with the capital necessary to manage a strategy optimally.
“We are very thoughtful about how we educate advisors around lockups,” he says. “Even if there is a longer lockup, maybe that is appropriate for the strategy. We want to strike a balance between giving investor-friendly lockup terms without compromising the performance of the portfolio.”
Another feature that Goldman Sachs Alternatives prides itself on is its Value Accelerator Platform, a group of business experts that serve as advisors to portfolio companies. “It’s an organization of industry experts who have operating experience across different geographies and industries,” says Kniffen. “They can provide advice about how to drive value within an investment.”
Kniffen and his team knows that the world of alternative investing can be a lot for many advisors to grasp on top of their other responsibilities to clients. That’s why an emphasis is placed on educating advisors through written content, live calls with advisors, in-person meetings and webcasts.
“We present ourselves as a trusted partner and we draw from a lot of the lessons and wisdom from investing over a long period of time to help advisors,” Kniffen says.
