%20(1).png?width=600&height=338&name=menu_thumbnail%20(4)%20(1).png)
%201.svg){kind=small}
Co-founders Jacob Miller and Joe Lonsdale on helping investors access private markets
Key Takeaways
- Compared to some black-box trading strategies, private markets are relatively easy to explain. At the most fundamental level, private markets managers either buy good companies at good prices, or they lend to solid borrowers at attractive rates.
- Understanding how private markets work and their role in a portfolio is an important part of what Opto does for RIAs. Educational videos and articles are useful, but so is empowering RIAs with the tools and data to build customized portfolios.
- Documentation and performance reporting for private markets has historically been difficult. Opto’s technology integrates reporting systems and consolidates documentation, which makes the process efficient for clients.
Transcript
Joe Lonsdale How do you educate the RIAs about what's going on? How do you help them do this easily? Is this a big stressful thing for them to engage with? Like, how do you make it easy?
Jake Miller Yeah, so a lot of them have a bad experience of alternatives more broadly coming in because there were a ton of hedge funds in the mid-2000s that didn't do so well. And a lot of these can be black box strategies. One thing in our advantage is private markets are, at the end of the day, relatively simple to explain. I mean, they're buying a good company at an attractive price or lending to a good borrower at an attractive rate. Now, obviously, they're intricacy in how do they pick those deals, price them, etc., but the baseline is much easier to understand than I have a black box that trades currencies. Yep. On top of that, we really try and get them in the room, both virtually and physically, with those top allocators you mentioned, top multifamily offices, single family offices. Seasoned allocators, less so on the institutional side but people who really understand what it means to manage wealth and how they've done that successfully; at most, the average family office holds about 30 to 50% in private markets and has a ton of experience that they can share with our users.
Joe Lonsdale That makes sense, and then and then, is there some way to make it easy? I mean, by public markets, you just click buy on E-Trade or something or Robinhood, I suppose if you're the younger generation, like, what are you doing? Can just click buy on these alternative too? Is there like 100 pages of paperwork, or how does it work?
Jake Miller Yeah, this has historically been really painful. We solve this in two ways. One, our primary way of doing business, we build custom funds with our RIAs. This allows them to take their principles, values, views, as well as input from us on what we're super excited about, and create a wrapper that will hold five, ten, even fifteen managers at a time. And it'll be just one subscription document to get access to all of them. And it also be at a minimum that allows even folks on the smaller end of the wealth spectrum to get diversified access to privates. Now that one sub-doc is made a lot easier because we integrate with reporting systems, custody, CRM, and so the sub-docs become 90, 95% pre-filled. The RIA just has to come in and basically click generate documents, and it's all via e-signature. I know firms that are still using fax machines and so it's not...
Joe Lonsdale Basically, technology makes this all a lot easier and that's your job.
Jake Miller And the information flows correctly, which is really important. If it's on paper, you can easily miss a K1 and misfile your taxes. You can not know where performance stands when managers late. How do you talk about that? We've built rails so that every relevant piece of information shows up two plus one, and it'll feel a lot more like what you're used to. Joe Lonsdale The next day, which is fast, and I guess I know a lot of content. You're interviewing managers you’re teaching...
Jake Miller Yes, we’ve filmed over 100 videos now I've written about 75 articles as well as about 25 primers; what are capital calls? What is a sub-doc? Stuff that maybe you don't want to read more than once, but it helps advisor get comfortable and confident to go talk to their clients.
Important disclosures
Opto Investment Management, LLC (the “Firm”) is a wholly-owned subsidiary of Opto Investments, Inc. and is an SEC-registered investment advisor. Registration with the SEC does not imply a certain level of skill or training. SEC registration does not mean the SEC has approved of the services of the investment adviser. This website is operated and maintained by Opto Investments, Inc. Certain products described herein and institutional relationships may involve investment advisory services provided by the Firm. This website is presented for financial institutions and investment professionals only and is not intended for individual consumers or retail investors, unless specifically noted. Unless otherwise indicated, commentary on this site reflects the personal opinions, viewpoints and analyses of the author and should not be regarded as a description of services provided by the Firm or its affiliates. The opinions expressed here are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual on any security or advisory service. It is only intended to provide education about the financial industry. The views reflected in the commentary are subject to change at any time without notice. While all information presented, including from external, linked or independent sources, is believed to be reliable, we make no representation or warranty as to accuracy or completeness. We reserve the right to change any part of these materials without notice and assume no obligation to provide updates. Nothing on this site constitutes investment advice, performance data or a recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. We disclaim any responsibility for information, services or products found on linked websites. Images and photographs are included for the sole purpose of visually enhancing the website. None of them show current or former clients and should not be construed as an endorsement or testimonial. All investing is subject to risk, including loss of principal. Historical performance is not a guarantee of future performance and clients may experience different results. This information contains certain “forward-looking statements,” which may be identified by the use of such words as “believe,” “expect,” “anticipate,” “should,” “planned,” “estimated,” “potential” and other similar terms. Examples of forward-looking statements include, but are not limited to, estimates with respect to financial condition, results of operations, and success or lack of success of the depicted investment strategy. All are subject to various factors, including, but not limited to general and local economic conditions, changing levels of competition within certain industries and markets, changes in interest rates, changes in legislation or regulation, and other economic, competitive, governmental, regulatory and technological factors affecting operations that could cause actual results to differ materially from projected results. See related disclosures at https://www.optoinvest.com/disclaimers.
