Uncover the dynamics of FinTech in an exclusive interview with Alan Strauss, Director of Investor Relations at Crystal. Delve into insightful conversations about the evolving financial technology landscape and its impact on the industry.
Alan, can you tell us about your role as Senior Partner and Director of Investor Relations at Crystal?
I have been with Crystal since 2009. I lead our investor relations department and focus on client relations, sales and marketing initiatives. My job is to grow and educate our advisory network and build trust and transparency among our existing advisors and their clients.
What strategies do you employ to effectively communicate the company’s financial performance and investment opportunities to investors?
Our investor relations team serves as the primary point of contact between the platform and our network of over 200 advisory firms. We keep our network updated on the platform’s activities as well as on firm, fund, and portfolio updates.
On a monthly (hedge funds) and quarterly basis (private market funds), all advisors and their investors receive a consolidated account statement that explains both underlying fund exposure performance and overall portfolio performance. Advisors also receive a firm-wide performance report which allows them to see how all their clients’ portfolios are performing, a great tool for their business development and support.
Additionally, we provide regular firm/fund updates through newsletters, research reports, and/or one-on-one discussions. Advisors are the first to be presented with new and exclusive opportunities to include in client portfolios. In addition to helping keep advisors and their clients informed, our conversations help us gather feedback, which provokes constant improvement and change for the better.
Upon request, we also help advisors in their business development efforts. We often sponsor events and explain the benefits of alts, our manager roster, key competitive advantages, and a discussion of our proprietary technology and streamlined operational workflow. Industry audiences learn that through our end-to-end solution, they can deliver institutional private equity, private credit, and hedge funds exposures to their QP clients’ portfolios, while significantly reducing the operational burden associated with this asset class.
What key metrics do you monitor to evaluate the success of your investor relations efforts?
The number of new advisory relationships, repetitive business and increased investments from existing advisors and their clients, and the duration of a relationship with an existing advisory firm.
Can you discuss your experience in managing investor relations during a period of significant corporate change, such as mergers, acquisitions, or restructuring?
As our business has grown, we have always maintained a consistent ownership structure. We are 100% privately owned, creating an alignment of interests between the platform, end investors, and the investments available. In fact, partner capital makes up approximately 8% of platform assets.
What were the key findings of Crystal Capital Partners’ Spring Alts Survey of Financial Advisors?
The survey indicates the industry is ostensibly migrating to quality when it comes to private market and hedge fund investment opportunities. The survey highlighted that advisors not only value the quality of assets offered, but also prioritize transparency in manager sourcing, research, and due diligence reports.
Why did investment caliber emerge as the most important factor for advisors when selecting an investment platform according to the survey?
For many investors, 2022 was one of the toughest in terms of the environment. Stocks and bonds were down, and global macro challenges dominated the economic terrain. Last year, with the changing economic environment, many of the resourced firms were able to nimbly navigate murky markets and produce impressive results.
A recent CAIA study displayed the average, top-quartile, and bottom-quartile investment manager performance for various asset classes. The takeaway: manager selection really matters, as the spread of performance outcomes for alternative strategies was higher than in traditional asset classes.
We take a conflict-free approach toward manager selections, which means we are not compensated by any of the managers on the platform, nor do we receive any placement fees for the distribution of any fund. Managers are selected based on their merit. In 2022, most of the hedge fund managers on our platform outperformed their respective benchmarks and peers. This remarkable outperformance demonstrates our investment team’s ability to identify and source institutional managers, even in challenging markets.
Established funds have experience navigating varying market cycles. They usually have the resources to support robust and diversified strategies, systematic trading infrastructures, rigorous risk management processes, and a deep bench of investment professionals.
What were the other significant factors that ranked high in importance among advisors when considering an alternative investment platform?
Education, presentation materials for clients, and other forms of support ranked high in importance among advisors when selecting an alternative investment platform – features that are all available for Crystal’s clients.
Investors are increasingly turning to alternative investments while reducing their traditional holdings. Private equity, an alternative asset class, has grown rapidly, with assets under management increasing from $648.6 billion in December 2000 to $9.26 trillion by September 2022, according to a recent study by Preqin. This kind of growth must be contextualized for investors with education they value and understand.
How did advisors prioritize transparency in research and due diligence reports when evaluating investment platforms?
It has become increasingly common for platforms to accept some sort of compensation from the funds in return for distribution, a practice that is inconsistent with providing objective advice. Indeed, it not only creates conflicts for the platform in terms of fund selection but ultimately dilutes the quality of products that advisors push to end clients.
Our manager selection is conflict-free, as managers are selected based on their merit. With that said, our research and due diligence reports are factual and objective. We update reports on an ongoing basis and communicate any changes with our advisory network. Ongoing reviews involve tracking the managers’ investment decisions, performance attribution, and alignment of interests with investors. By regularly evaluating the managers, advisors can assess their ability to deliver consistent returns and adapt to changing market conditions.
Why is ongoing support beyond the point of sale considered crucial for advisors and their clients in the context of alternative investment platforms?
Unlike traditional investment portfolios which may offer daily liquidity, alternative investments require ample services beyond the point of investment, which our IR department spearheads. While institutions such as endowments have robust operational infrastructure capable of managing the varying liquidity schedules of multiple alternative investments, most RIAs struggle to deal with this operational burden.
On the hedge fund side, advisors need liquidity tracking and rebalancing tools. On the private market side, there are commitment, investment, and distribution periods. With Crystal, support at the point of sale and beyond means a more streamlined alts experience for advisors and their clients and complements services that include the management of subscriptions, rebalancing, liquidity, capital calls, distributions, account statement, and business development.
Crystal’s platform currently has over 500 customized portfolios which aggregate to over $800 Million AUM (As of June 1, 2023). Offering a streamlined investment experience is of top priority.
How did respondents perceive Crystal’s availability of support as a key differentiator compared to other alternative investment platforms?
Close to 80% of respondents in Crystal’s Spring Survey confirmed there is increased concern among advisors about investment support beyond the point of sale when it comes to alternative investment platforms, and 100% of respondents agreed the availability of support is a “key differentiator” for Crystal relative to other alts platforms. Alts are complex, compared to traditional investments, and ongoing support is necessary for advisors and their clients.
Financial advisors on the Crystal platform are most concerned about delivering the best alternative investment opportunities to their clients. The availability of support builds trust between Crystal and advisors and pays forward in the successful outcomes for firms that partner with us.
Does Crystal offer any additional resources or tools to enhance the experience of financial advisors and their clients on the platform?
Crystal’s platform provides advisors with access to 50+ institutional private market and hedge funds across a variety of strategies and vintages. But how does an advisor quantify the appropriate level of alts exposure that a client should have relative to traditional portfolio models?
Answering this pivotal question requires working with high-level analytics. To successfully align alts with their clients, our proprietary technology helps advisors benchmark with ease against existing portfolios and other funds in the same universe. Advisors can upload current client portfolios and measure the effects alternatives can have on their risk/return metrics. They can analyze how funds on the platform match up against each other. We deliver a one-stop destination for investing: comparing, buying, and managing alts.
Once the portfolio is constructed, our client-facing investment proposals place a strong emphasis on education. They illustrate the benefits of this specialized asset class at the individual fund and/or portfolio level, helping advisors educate their clients on the value alts can bring to a traditional portfolio.
Are there any plans or initiatives in the pipeline at Crystal to further enhance its offerings and support for financial advisors?
We are pleased to report significant growth in our technology staff since 2020, representing a substantial investment in innovation on the Crystal platform. Currently, 50% of our team is composed of technology professionals with expertise in software development, Mar-Tech, engineering, and cybersecurity. We are ramping up investments in UI/UX and plan to launch a new investor portal that has been redesigned from the ground up on a cutting-edge technology stack. The portal will deliver a novel alternative investment experience for advisors and their clients that stays current with changing user expectations and includes new functionalities that feel logical, intuitive, and easy to use.