Author: Gérald Autier, Managing Director, Investae
July 2, 2021
The start of 2020 was marked by an unforeseen event that will have far-reaching consequences for the decade to come. The COVID-19 outbreak is an unprecedented crisis that has brought much of the global economy to a halt at various times during this year, and the pandemic will have reshaped consumer behavior and the way business is conducted. worldwide. Impeding much of the economic activity of most countries, the first effect of the pandemic has been a sharp decline in most financial markets with the notable exception of less liquid assets, such as alternative assets. As investor allocations increase and diversification becomes of the utmost importance, alternative investments play an increasingly critical role in portfolios. Investae is a boutique investment firm specializing in alternative investments. We strive to provide financial professionals – financial advisers, family offices, wealth management companies and even private banks – with the best ideas for their clients’ portfolios.
We mainly work with private debt instruments. The growth in private debt arose out of the financial crisis of 2008, when government authorities consolidated the regulation of international banking operations. The Basel III agreements published in December 2010, aimed at strengthening the financial system, have tightened access to credit.
Believing that the severity of the crisis was in part due to the growth of excessive bank financing, regulators concluded that restrictions on certain types of financing were the solution to limiting additional systemic risks to the banking system. As a result, banks were required to keep more cash in reserve for business loans, unlike loans to governments. The direct consequence of this regulation is that some companies have less access to credit, if at all.
Even with healthy balance sheets and positive cash flow, the collateral these companies can offer may no longer be acceptable to banks. This allowed investors, both institutional and private, to fill the void. Private debt instruments have notable advantages for the investor portfolio, namely higher yield and lack of correlation with market fluctuations.
We built our platform for financial advisors and family offices with one simple goal in mind: to provide alternative asset opportunities that are easier to understand for their investors.
However, there is a big downside, limited or no liquidity, even though these instruments are traded on European stock exchanges. Investing in private debt amounts to sacrificing liquidity for higher returns and stability of capital. In the financial world, it is important to pay particular attention to proper due diligence when it comes to selecting investment opportunities. Investae annually reviews more than 30 investment opportunities in the field of alternative assets.
We identify opportunities with characteristics that match investor expectations and preferences, compare performance to the market, assess how better or worse that particular investment is than others, and how good the investment opportunity is. attractive.
Usually, the reliability of the credit rating is set by the rating agencies (S&P, Fitch, Moodys, ARC Ratings, CreditSpectrum, Euroratings, etc.). When available, we will review the credit rating. We will explain how this investment opportunity can be tailored to investor portfolios and how it affects investor asset allocation. We will assess how the investment opportunity protects the interests of investors. We will identify the risk factors and how the company mitigates those risks, and we will assess the different scenarios and outcomes that may develop over the life of the investment. We will assess the different exit routes available to investment managers. Whenever necessary, we will need legal advice from a law firm. A law firm may, for example, review the structure of the investment and issue a legal opinion describing whether the transaction is legally structured and what type of investors are allowed to buy it. We organize a face-to-face or online meeting with the management of the firm. We will constantly monitor the investment in news and other reports, in light of market ratios and performance expectations. Whenever necessary, a rebalancing can be suggested.
Make Investae stand out
We fully understand that for many finance professionals, and even more so for their clients, alternative investments are a relatively new asset class. Investae has built a fully integrated marketing platform including a learning center for finance professionals. The objective of this platform is to make the world of alternative investments simple and accessible to finance professionals.
Financial education is the key to the success of finance professionals and their clients. The indecision of potential investors is usually a sign that the offer would benefit from further explanation. Most of the time, potential investors will be very open about their concerns, but in some cases they don’t provide a lot of feedback. When an investor delays his investment decision, it is usually a sign that part of the characteristics of the investment may be confusing or unclear, or that he is afraid of making the wrong decision.
Sometimes investors can even ignore the real reason for their indecision, what they call an “instinct”. This is usually a sign that questions about the offer remain unanswered.
The potential investor may not even be aware of the hidden fear that prevents them from going any further. We built our platform for financial advisers and family offices with one simple goal in mind: to provide alternative asset opportunities that are easier to understand for their investors. We achieved this by creating marketing tools to educate both investors and financial professionals. For example, for each opportunity on the platform, we create short animated videos that will explain the investment proposal. These days, investors are bombarded with investment opportunities. If the first interaction they get with an investment opportunity is a 25-page presentation or some other written document, chances are they won’t even review it.
Whenever a financial professional enters into an interaction with a potential investor, the goal should be to grab their attention and generate interest and curiosity. This is where short animated videos come in handy. They are the perfect tool to explain an investment opportunity in less than two minutes. They are also extremely useful in the post-COVID-19 world when most professionals are asked to work remotely as they can be shared through instant messaging.
In addition, our platform also offers what we call an “Objection Center,” which is a resource to help resolve the most common objections and questions from potential investors. In some cases, a potential investor may ask a good question about the performance of the investment opportunity under certain economic circumstances. We deal with the issue directly with the issuer or investment manager and provide the answer through this resource.
Finally, our platform offers continuous support and coaching to all finance professionals. It is becoming increasingly difficult to get the attention of investors in a crowded financial world. Investors lead busy lives and don’t always have time to get to the heart of every opportunity that comes their way. It is the job of the professionals to make the investment offer clear and understandable. We know that investors are very keen to learn more about the mechanics of financial markets, but it should be done in a way that takes into account their limited knowledge of the financial world.
We empower investors with the knowledge to value different financial products, help them make informed decisions, and enable them to understand and properly manage risk. This reduces the vulnerability of investors. This is how the famous quote from Ben Franklin; “An investment in knowledge pays the best interest” should be understood.
Education is the key to the success of finance professionals and their clients. Our goal is to become the outsourced alternative investment desk for finance professionals. We believe that the quality of our due diligence and the marketing and educational tools we provide really set us apart in a crowded and competitive field.