iCapital launches new portfolio construction tool

A month after launching a new digital marketplace for alternative investments, iCapital is rolling out a new tool to help advisors incorporate alts and structured products into client portfolios.

On Wednesday, the fintech company, which services $159 billion in global client assets and is used by more than 100,000 financial advisors, announced the public launch of Architect, a portfolio construction software for financial advisors. Architect provides historical performance and risk factor analysis to show advisors how alts can fit alongside traditional asset classes and impact client outcomes.

While portfolio management is an already crowded corner of the advisor fintech ecosystem, many of the top products fall short when it comes to incorporating alternatives, iCapital chairman and CEO Lawrence Calcano said in a statement.

“Advisors have long expressed a need for more comprehensive tools to effectively evaluate the inclusion of alternatives and structured investments in client portfolios,” Calcano said.

Though Architect can incorporate “vanilla assets” as well as alternatives, iCapital isn’t necessarily looking to replace the portfolio management software firms already use, added Jason Broder, head of iCapital Solutions. Architect is available at launch within iCapital’s digital user experience for advisors and the company plans to integrate it with popular portfolio management, proposal generation and reporting tools.

Architect is already feeding data on alternatives into Envestnet’s proposal generation tool, Broder told InvestmentNews.

“Part of our strategy is to work really closely with these other large platforms,” he said. “We don’t want advisors to change their entire workflow and come to something new unless they want to.”

The company declined to specify how much Architect will cost advisors to access. The cost will depend on how advisors access the tool and the level of service the advisor is interested in, a company spokesperson said.

The hope is Architect gets independent financial advisors to start thinking about alternatives and structured investments as a core element of portfolios rather than a satellite component, Broder said.

“The goal of the tool is to use data and analytics to really help an advisor see if adding an alternative creates better alignment or worse alignment with a client’s investment objectives,” he added.

ICapital has raised a total of $729 million since it was founded in 2013 and is valued as high as $10 billion, according to Crunchbase. The company provides access to thousands of funds from hundreds of product providers, and in 2023 iCapital is focusing on making its ecosystem more user-friendly.

Architect has been in development for two years and has been in a beta test with 200 advisors, Broder said. It will work in tandem with Marketplace, the digital service iCapital announced in June that combines the various platforms from alternative investment providers into a single location.

“Architect is an extremely useful tool utilized by our advisors to help analyze and explain how the inclusion of alternative strategies can diversify and strengthen client portfolios,” said Dick Pfister, CEO of AlphaCore, a La Jolla, California firm with $2.4 billion in assets under management that was part of the beta test. “The ability to both visualize the potential return, and stress test the risk/reward characteristics of adding unique alternative assets, is a major differentiator.”  

The moves come as advisors are increasingly allocating clients assets toward alternatives. Average allocations to equities decreased from 60.1% in 2021 to 53.7% in 2022, according to data collected by technology company Advyzon. Over the same period, allocations to alternatives increased from 0.6% to 2.7%.

However, new tools from alternative asset firms like iCapital don’t necessarily mean the death of traditional 60/40 portfolios, Broder said.

“Advisors are starting to evolve their thinking to a place where a 60/40 may work, but 100% [of assets] don’t need to be in public markets,” Broder said, adding that advisors can maintain a 60/40 split while some of the equities are held in private markets. “That mindset of going from public to private is what we’ve seen really intrigue advisors.”  

Banks may buy into AI but here’s why it won’t replace financial advisors

Source link

Share with your friends!

Leave a Reply

Your email address will not be published. Required fields are marked *

You have not selected any currencies to display

Get The Latest Investing News
Straight to your inbox

Subscribe to our mailing list and get interesting stuff and updates to your email inbox.

Thank you for subscribing.

Something went wrong.