Advisors investing in prop products – strange sounding…
Registered Rep chronicled the story of a few Independent Advisors & RIAs starting their own investment vehicles. A primary selling point is transparency – if the advisor manages the vehicle, he/she can share daily transactions and holdings.
So many asset managers; so many investment vehicles; so many investment strategies – these advisors could not find any investment product that provides the transparency and the strategy they seek? Naturally, I was a little skeptical. The virtues of open architecture are well-documented and many providers invest heavily to reinforce those benefits. So why bother?
Maybe there’s a different play though. I can think of two investor types that may prefer this:
- Nervous Nellies – They want to spend their evenings fretting over holdings, performance, and other data points. For that reason, they like trading in specific equities and even mutual funds. They may have bought into the concept of alternative investment strategies, but can’t reconcile the opaque nature of hedge funds.
- Bragging Bills – They want exclusivity at the cocktail party. An adviser who provides these clients access to some fund without easy access can boast about it. It’s sort of hedge fund “lite.” (And this may improve prospecting for the FA.)
Is the advisor unable to find a product or is there value in having a proprietary product in the bullpen?