FWR asks CAIS about the rationale behind the launch of the firm’s latest technology aimed at streamlining IPO distribution to the independent wealth management space.

Here, Family Wealth Report asks Matthew Brown, co-founder and CEO of CAIS, about the rationale behind the launch of the firm’s latest technology aimed at streamlining IPO distribution to the independent wealth management space.

CAIS provides financial products to wealth management professionals including alternative investment funds, IPOs and follow-ons, structured notes and real assets.

With the resurgence of the IPO market and growing number of deals in recent time - Alibaba and Twitter may spring to mind as among the most notable - CAIS believes it is opening up the sector to RIAs, family offices and other industry players which have historically been somewhat restricted in terms of access.

In 2014, IPOs outperformed global indices by around 12.3 per cent on average, while capital raised stood at $256.5 billion - up 50 per cent from the prior year and the highest level since 2010 (source: EY Global IPO Trends 2014).

Quite simply, how does the new technology work?
 
The CAIS Capital Markets platform offers access for wealth managers interested in IPOs as well as featuring a menu of primary and secondary offerings across the equity and capital markets spectrum.
 
The way the technology works is that advisors can log onto the CAIS site through a password-protected portal. Once there, they can click on the syndicate section to see a consolidated calendar of various banks’ underwritings or offerings available through CAIS. When they choose a specific deal they can read and learn about key terms of the offering (the price range, the sector, expected timing, the use of proceeds, the underwriters, etc.) and download the prospectus.
 
We’ve designed the platform to give advisors flexibility in how they use it. For example, the calendar of deals can be sorted by sector; by IPO, debt deal or private placement; by deal value; or by industry. Our clients that access these offerings tend to visit the site several times a day because they want to stay up-to-date on the latest developments.
 
When the advisor finds the right deal for a particular client he can enter a desired allocation amount. Clicking “submit” sends an indication of interest (IOI) message to our desk, and then, based on the total number of shares available for the deal, the advisor receives an electronic indication that the order has been filled, and initiates a very easy workflow of settlements.

What drove CAIS' decision to launch something focused on IPO opportunities?
 
CAIS has a singular mission, which is to bring a multi-product platform to the independent wealth channel and give them access to opportunities and financial products that were previously unavailable. Based on advisor demand and the lack of broad access to syndicate offerings across both equity and debt capital markets, we felt this was an obvious product offering to bring forth.

How has the IPO investment landscape changed in recent years?
 
I think the most interesting change has been the growing awareness by founders / management of companies, and therefore their banks, of the importance of the independent wealth management channel. There has been a realization that there is tremendous value to companies in having democratized initial public offerings, which in turn leads to a broader long-term shareholder base.
 
What is your strategy for identifying IPO opportunities?
 
We partner with the top banks and underwriters in the industry, those who understand the value to corporations of a diversified channel of investors, and we go on from there.
 
What factors are creating demand among wealthy investors for access to IPOs?
 
Our clients are wealth managers and financial advisory firms and we work with them to find the best solutions for their clients, who are the wealthy investors to whom you refer.
 
That said, in the IPO world we facilitate the relationship between corporations and their shareholders. Corporations that are going public or issuing equity or debt are eager to have wealth managers as buyers of their IPOs and secondary offerings because they represent investors with a deep multi-trillion dollar pool of assets. These are investors who are in it for the long haul and will help the company diversify and build its shareholder base.

Do you have any data demonstrating heightened appetite for such investments?
     
I don’t have specific numbers to share at this time, but I can say that our advisors have demonstrated a large and growing appetite for such offerings. In the 18 months since we launched this business, we have participated in more than 300 transactions representing 25 different banks.

On average, the demand from the advisor channel is anywhere between five and ten times greater than our supply. And that’s not because we don’t have sizable allocations, it’s much more a comment on the sheer demand.