We catch up with a US wealth management firm that chooses to keep its investment management in-house rather than outsource it.
That many wealth managers farm out their investment operations to curb costs and focus on other tasks is now a given of the industry. The model of “outsourced chief investment office” or OCIO is well established.
The organization serves private wealth clients with business management, tax, insurance, and planning services, while also running proprietary alternative investments across multiple asset classes including private equity, venture capital, crypto, real estate, private debt, and traditional equity and fixed income portfolios.
And, as Spielman pointed out, Manhattan West is a “one-stop shop” for clients’ needs, whether for financial planning or investment. Unlike many wealth managers, it manages investments, including those in the alternative space, in-house (private equity and real estate).
“We have found this is the best fit for what we are trying to build,” Spielman told Family Wealth Report.
With clients, the firm targets alternative investments to make up about a third of the total portfolio, she continued.
Alternative investments – also called private market investing – are all the rage, and are likely to remain so while inflation remains elevated. These asset classes aren’t all cheap, however, with a performance fee on top of the management fee.
“We offer full transparency on what fees and inherent risks are involved with all our alternative investments. These are included in all our marketing material and investment documents,” Spielman said. “However, it is our belief that despite the higher up-front costs, the potential upside of the returns will more than offset any of these fees.”
As far as “liquid alternatives” are concerned – such as listed funds – Manhattan West isn’t looking to add this area to its offerings yet.
The macro-economic environment cannot be ignored in any investment conversation. FWR asked Spielman how the firm is managing client money during this inflationary period.
“For better or worse, monetary policy has taken a larger role in our economy and the Fed's only tool to tame inflation is to suppress demand through tightening monetary conditions by increasing the Fed funds' rate and quantitative tightening,” she continued. ”Companies with lofty valuations have already seen multiple contraction due to higher interest rates and companies with weak balance sheets that can't fund themselves cheaply are going to have a tough time in this environment.”
“That's why we've maintained a value tilt in equity focusing on quality names with strong credit profiles. In fixed income, we've maintained a short duration strategy and will continue to [do so] until inflation shows signs of being tamed,” Spielman said.