The push to integrate alternative investments into managed accounts is gathering momentum, but implementation remains a sticking point. Christian Ryan, founder of FinCap and a long-time participant in the advice ecosystem, believes the key to unlocking alternatives in SMA structures lies in simplicity, alignment and innovation.
Having spent nearly two decades working with managed accounts, Ryan notes that adoption has already reached a critical mass. “Over 70 per cent of firms now are using managed account structures, either in full or in part, to manage their assets,” he says. “They’re great products, great ideas. But the challenge has been implementing alternatives, especially private markets, properly.”
The complexity of administering private assets within SMAs, particularly with respect to liquidity, has made many advisers reluctant to engage. “Private markets have been a fundamental problem for a lot of firms to actually solve, and do it properly,” Ryan says. “How do I create liquidity? How do I administer it in a way that makes sense for clients and advisers alike?”
To address this, FinCap is developing a dedicated technology platform that Ryan hopes will allow advisers to access private equity and infrastructure strategies through an SMA framework. “There’s a lot of great strategies, a lot of deep thinking,” he says, “but most advisers probably only spend 10 per cent of their time thinking about investments. The rest is clients, tax, cash flow. We want to help them actually run these strategies with minimal friction.”
For Ryan, the beauty of the SMA is that it’s fundamentally an implementation structure. “If you can get the client ownership as close as you can to the asset, you’re more likely to deliver the best net return,” he says. But to do this, the structure must remain clean, transparent and cost-effective. “Advisers like simplicity. They like transparency. If we can keep some of the structures out of the cost stack – feeders, wraps, hidden layers – that’s a win for the client.”
Legacy platforms are struggling to adapt. “They’ve done a great job across a whole range of things,” Ryan concedes, “but when it comes to private assets via managed accounts, they’re stuck. Their technology is 15 years old, and they’d have to spend a lot to change that. They’re still growing and enjoying rising share prices, so why would they?”
By contrast, FinCap’s aim is to create a purpose-built infrastructure for private assets. “We’re wrapping resources around a treasury function that helps with liquidity,” Ryan explains. “The goal is to create a private-asset marketplace, a structure where people can trade and net-off positions, like a platform does today.”
For Ryan, the ability to monitor managers closely is critical, especially in private equity and operating real estate. “When you’re buying a business, you do legal, financial, commercial and operational due diligence. It’s the same with fund managers. You’re investing in those people, and as a fiduciary, that personal sense of responsibility matters.”
What distinguishes the SMA structure, he says, is the flexibility it gives to move between managers, funds and even asset classes. “In a diversified portfolio across equity, real estate and infrastructure, if something changes, you can actually act. You’re not trapped. And that’s important, especially in property, which takes months to transact. There’s a big market, but it’s illiquid. The SMA helps bridge that.”
That flexibility is what Ryan believes will make managed accounts a permanent home for alternatives. “There are so many different strategies, so many different assets, and it’s much bigger than the listed world,” he says. “Alternatives are part of everyone’s life already – a property here, a business there – but until now it’s been hard to bring them into portfolios efficiently.”
Ultimately, the challenge is part structural, part cultural. “It’s not just about technology,” Ryan says. “It’s about making the whole experience simpler and more intuitive, for advisers and their clients. If we do that, managed accounts could become the best vehicle we have to access the full range of alternative investments.”