The US alts firm making strides in the Aussie platform market

For overseas fund managers coming to Australia, a focus on platforms is critical for achieving growth, according to IMAP chair Toby Potter, flagging iCapital as a firm succeeding in this goal. 

With trillions of assets held in superannuation, a move from accumulation and decumulation and the upcoming intergenerational wealth transfer, this is making Australia an attractive market for overseas managers. 

However, it can be difficult for them to adjust to an Australian market with its differing regulation, fund structures and adviser market. 

Commenting on a podcast with Clearway Capital, Potter said: “If you are an offshore manager and coming to Australia then you have to remember the market is very platform-driven, they are dominant in the retail advice market. In the US, managed accounts are held individually and typically prioritise customization and tax management whereas some of those tax tools wouldn’t be available in Australia.

“There’s no direct to retail market for managed accounts in Australia, it’s a very solid adviser-based market.
“Platforms have a strong vested interest in using separately managed accounts as a vehicle for FUM acquisition for themselves. Managed discretionary accounts (MDAs) are run on platforms but have a much more diverse operating structure so US strategies need to be repackaged through local vehicles to meet the regulatory requirements in this market.”

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He flagged that with the rise of alternatives and private markets funds which are being launched, these could also be difficult for new managers to have listed on platforms due to their liquidity capabilities. 

“Platforms do have a bit of difficulty accommodating illiquid products, we are not seeing closed-ended funds or genuine illiquid ones being offered by managed accounts. What we are seeing is vehicles that create liquidity through their cash holdings as being a way for managed account investors to get the benefit of less liquid underlying investments,” he said. 

“SMAs are trying pretty hard to accommodate them but MDAs are the main structure that lends itself much better to accommodating illiquid assets.”

Expanding on this to Money Management, Potter said overseas firms are looking to partner with distribution firms such as Pengana or Pinnacle which are already based in Australia as an easier route, acknowledging it is difficult for overseas firms to build relationships domestically. 

However, he referenced alternatives firm iCapital as one is successfully making strides in this space. Founded in 2013, the New York-headquartered firm has US$228 billion ($345 billion) in alternative platform assets and works with over 2,900 wealth management firms globally. It describes itself as offering a way for wealth managers, asset managers and distributors to expand their access to private markets and alternatives.

While not all of its offerings are suitable for Australia, Potter noted it has a much wider breadth of offerings than other offshore managers do.  

In Australia, it recently hired Mark Oliver from Insignia Financial as its head of client strategy to boost its presence with wholesale advisers in Australia and is set to open a Sydney office. Oliver was previously 

“Australia is an important strategic market in our mission to make private markets more inclusive. With the hiring of Mark Oliver, we will accelerate our growth in Australia and continue to facilitate increased access to alternative investments, making them a key component of diversified portfolios and enhancing financial outcomes for clients,” said Marco Bizzozero, head of international at iCapital.

It has already set up partnerships with J.P. Morgan Asset Management to open up access to JPMAM alternative strategies for Australian wholesale investors and with platform Netwealth. The Netwealth strategic partnership will distribute global private market and hedge fund investments to financial advice firms and their wholesale clients across Australia. 

In March, iCapital announced a partnership between Netwealth and Lonsec Investment Solutions to launch a new alternative asset investment solution for financial advisers and their high-net-worth clients.

The LIS growth alternatives individually managed account (IMA) solution was constructed to enhance portfolio diversification while providing a flexible and customisable investment structure through a managed discretionary account (MDA).

Outside of Australia, iCapital also announced a deal with BlackRock in the same month to deliver the technology for a model portfolio combining public and private markets assets. This marked the first time that a customisable model portfolio offers access to both private and public markets alongside each other via a unified managed account structure.