UniFi by CAIA Crossing the Threshold - 39

not) attempt to replicate the Endowment Model, there are some important cultural lessons
to be learned from them. Investors should not underestimate the importance of operational
and cultural considerations when implementing alternative investments. These strategies
are more complex and require more thoughtful integration than traditional investments.
Some best practices might include:
* Doing the Operational Pre-Work - Before investing, determine what your firm is
trying to accomplish and what it can handle operationally. Fund vehicles, trading,
performance reporting, and tax considerations are often different in alternative
investments-it's important to spend time getting comfortable with those changes.
* Educate and Create Consensus Across the Entire Firm - Everyone across the
organization should understand the portfolio and practice management implications
of alternative investments. This requires practical and objective education.
* Set Proper Expectations with Investors - Conversations around alternative
investments with investors should focus on the importance of long-termism while
setting proper expectations around illiquidity, risks, and fees. As Shannon Saccocia
noted, " For many investors, getting off of zero can be an important first step to
improving portfolio outcomes over time, but the momentum can quickly dissipate if
the exposures are not included in the ongoing dialogue. "
From an investment perspective, we can make several arguments as to why certain
alternative investments make sense in a diversified portfolio. However, the investment
case is merely one piece of the puzzle and there are several additional steps one must
take to move from ideation to implementation. While not an exhaustive list, these three
considerations can serve as important pillars to creating a successful experience for
investors and your organizations.
So, Where's the Best Starting Point?
Of course, education is the foundation on which many of these action items stand. It's
impossible to implement a long-term investment plan, invest in a sophisticated manner,
and embrace an " alternatives culture " within your organization if you lack the knowledge,
skills, and resources to get started. As Fran Kinniry emphasized earlier, when considering
the suitability of an alternative investment for a client, it is essential to carefully evaluate
its characteristics and assess how it aligns with the client's investment objectives and risk
tolerance. Effective evaluation comes with becoming more knowledgeable and that is
only the beginning. Alternative investments knowledge leads to better decision-making
and enhanced client communication. Practical and objective education can not only help
you start the integration process but also empower you to determine where alternative
investments may not make sense for your clients in the first place.
S
tart with the client, be holistically informed, and everything else will begin to fall
into place. Remember, embarking on this journey requires both intelligence and
courage. By following this path back to the client, armed with knowledge and insight,
you can navigate confidently through the complexities of investment decisions, ensuring
the best outcomes for those you serve.
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UniFi by CAIA Crossing the Threshold

Table of Contents for the Digital Edition of UniFi by CAIA Crossing the Threshold