Our Next Event: Alts Expo - Dec 13th
Independent RIAs are in many ways the “nexus” of the alternative investment industry. But advisors have many demands on their time, and face significant challenges in navigating the world of alternative investments.
Shana Sissel, founder and CEO at Banríon Capital Management, joins WealthChannel’s Andy Hagans to discuss how advisors can make alts accessible for all investors.
Watch On YouTube
- An overview of Shana’s professional background, and how she came by the nickname “The Queen of Alts.”
- Why so many advisors have a hard time including alternatives in client portfolios.
- The problem that many RIAs and advisors face when allocating to specific alts products.
- How the ETF industry has grown and evolved to allow for better overall portfolios (and client outcomes).
- The problem with BREIT, and why Shana didn’t recommend it to her clients.
- How Banríon Capital Management can help make life easier for advisors who are allocating to alts, even if a large proportion of their client base consists of non-accredited investors.
Featured On This Episode
- @QueenofAlts – You’re Doing It Alt Wrong (YouTube)
- The Ivy Portfolio: How to Invest Like the Top Endowments and Avoid Bear Markets (Amazon)
Today’s Guest: Shana Sissel, Banríon Capital Management
- Banríon Capital Management – Official Website
- Banríon Capital Management on LinkedIn
- Shana Sissel on LinkedIn
- Shana Sissel on Twitter
About The Alternative Investment Podcast
The Alternative Investment Podcast is a leading voice in the alternatives industry, covering private equity, venture capital, and real estate. Host Andy Hagans interviews asset managers, family offices, and industry thought leaders, as they discuss the most effective strategies to grow generational wealth.
Andy: Welcome to “The Alternative Investment Podcast.” I’m Andy Hagans. And today we’re talking to the Queen of Alternatives. That’s right, we’re talking with Shana Sissel, who is founder and CEO at Banríon Capital Management. Shana, welcome to the show.
Shana: Thank you so much for having me. It’s a pleasure to be here.
Andy: And we gotta start with the nickname. I mean, come on, it’s… For our show, “The Alternative Investment Podcast,” we have to start with the nickname. How did you get the nickname “The Queen of Alternatives,” the “Queen of Alts?”
Shana: So, I was on ETF Think Tank’s happy hour show that they do on Thursdays at 5:00 p.m., with the folks over at Tidal, Cynthia Nixon, Michael Venuto, and so on. And they were asking me about the origins of the name Banríon Capital Management. So, Banríon means “queen” in Gaelic. My mom is from Ireland. She was born in Killarney. And so I am the least creative person in the world. And I did pageants when I was younger. Most people who know me kind of know that story. So, I was thinking queen, tiara, crown. And every time I would put that into Google, there was one already. So I thought, well, maybe I can put it into a translator and maybe there’s a word in a different language that’s cool that will work. And lo and behold, the Gaelic word for queen is Banríon, so that’s how we became Banríon Capital Management. And then Cynthia Murphy from ETF Think Tank said, “Well, that makes total sense because you’re the queen of alternatives.” And alas, my nickname was born. So, Cynthia is kind of the Shaq to my Paul Pierce, if you will.
Andy: I love it. You know, there are worse things in the world to be than the queen of alternatives. I’ll tell you that much. It’s interesting, though, like, we launched this program, “The Alternative Investment Podcast,” and the original vision was we were gonna cover illiquid alternatives, right? Private equity, venture capital, private real estate. But my background in finance was in ETFs. It was kind of what the first businesses that I helped build, that I later sold, was ETF Database. And all we covered was ETFs. So, we went from, like, this liquid, exchange-traded world to now this illiquid world of alts. And then, I don’t know, a year into hosting this show, I kind of realized, you know, there’s all these great liquid alts. There’s intermittent liquidity products. It’s funny because I thought we were gonna be at this other extreme, and now, I don’t know if it’s just in my mind, or with the show, it feels like it’s all kind of blending together again. And with your practice and your firm, it seems like you have that same mindset, you know, whether illiquid alternatives, ETFs, anywhere in between, it’s like, it doesn’t matter. We’re trying to, you know, help investors meet their goals. That’s what matters. Do you see these things kind of blending together over time?
Shana: Absolutely. And it’s funny. So, I became involved in the world of alternatives in 2007. So, my first job working in the hedge fund space was as a junior analyst at Russell Investments Hedge Fund of Fund. And so that was sort of my first experience, right in the financial crisis. If you’re talking, like, canaries in the coal mine, that’s sort of how I, you know, earned my stripes, if you will, about alternatives. And it could have ruined me and made me never wanna be involved in alts again, since it blew up our fund, but it actually had the opposite effect.
And shortly thereafter, I joined an RIA, and I helped build their alternatives platform. And one of the key reasons that was successful is because right around 2007, a little history lesson here, is when the SEC relaxed some of the regulatory restrictions on 40 Act products, allowing for the proliferation of alternative product and hedge fund-like offerings. Now, that’s not to say those things didn’t exist before. They just were not common. They required some regulatory exceptions, and they were really complicated to do, so it wasn’t that you couldn’t find a long-short mutual fund, it’s that there were probably, like, three on the market. And they, you know, weren’t well-known, they didn’t really gather assets. But they didn’t not exist. It was just, not until ’07 did they have the proliferation, because of the regulatory changes. So, everybody remembers that, is that’s when all the 130-30 and 120-20 funds kind of came to be. And that’s because the restriction allowed for 30% leverage on the NAV. And that’s why it’s 130-30. And so that actually opened the door for our product offerings in the space. It started with mutual funds… Please excuse my cat. She keeps stepping on my keyboard. I have a kitten.
Andy: No. It makes for good TV.
Shana: And yes, it does.
Andy: It’s all good.
Shana: She’s awfully cute. She’s mischievous, but she’s cute.
Andy: I mean, we’re on YouTube. Like, how much better can it get than having a cat in the video for YouTube?
Shana: And not just a cat, like, the cutest kitten ever. So, you know, it started with mutual funds, and then as ETFs kind of grew in popularity, you started to see alternative ETFs. IndexIQ was one of the first to kind of introduce an entire suite of ETFs that were focused on trying to replicate hedge fund returns. And you had AlphaSimplex come into the mix, and others have grown from that. AGFiQ is another big one that kind of focuses on the space. But IndexIQ was the first, and I remember that because I went to their roadshow when they were getting ready to do those products. And so, you started to see the ETFs, and then, later on, you saw some regulatory opportunity for integral funds, that happened after the, what was it, Third Avenue blow-up, many years ago, where, all of a sudden, the SEC and the regulators saw maybe we should have something that doesn’t require daily liquidity, and so interval funds came to be kind of a thing.
And so, now there actually are substantial offerings in ETFs, interval funds, mutual funds that are hedge fund and hedge fund-like and provide access to areas that we never had before. And the reason no one noticed is because when the market goes straight up and equities are killing it, nobody cares. But in the last year or so, people have really taken notice of the importance of alternatives because a lot of these alternative products have outperformed. And the death of the 60-40, I like to call it the evolution of the 60-40, has been a huge topic now for years. And more and more people are starting to realize that this is an important diversification opportunity. And now we actually have track records going over 10 years that people can use to sort of backtest and see, like, even during the strongest bull market we’ve seen in decades, if you had alternatives in your portfolio, you actually didn’t underperform, per se, if you’re looking at it versus a traditional 60-40. It actually offered great diversification. And then when everything fell apart in 2020 and 2022, you actually got quite a bit of alpha from having that exposure. So, our focus is to be able to help advisors scale that, and help them kind of… If the one thing that hasn’t caught up with all of this product offering is categorization and…
Andy: Oh, gosh. I know.
Shana: …proper education. So, while there’s plenty of product out there, finding it and understanding where it fits in a portfolio is a completely different battle. And that’s where we step in and help advisors.
Andy: It’s funny you mention the categorization thing. It’s literally, like, a daily battle for me. I mean, number one, I’m getting pitched with podcast guests, and I’m constantly going…well, sometimes I’m going, “Is this even an alternative investment?” But I’ve kind of learned, you know, if the consensus considers it an alternative investment, I’m like, “Well, then it’s an alternative investment.” Right? I mean, for me, it’s almost to the point if it’s not a long-only stock or stock fund, if it’s not a long-only bond or bond fund, you know, I’m almost gonna say it’s an alt, or if someone tells me it’s an alt, I’m not gonna argue, right?
Shana: Yeah. But you look at things like NightShares, which I believe you had them recently on the show. NightShares would not be categorized by, you know, Morningstar or Lipper as a alt, because it’s not long-short. But it’s…
Andy: Well, that’s my point. Morningstar or Lipper, they’re not…
Shana: But the average advisor does rely on those resources to help them. And if you’re trying to build a portfolio where, number one, if you’re looking in the private space, there’s a problem with finding it because, you know, these are Reg D exempt, and so they can’t market themselves, and so you have to be on access portals to find these managers. You’re not an institution. You’re not necessarily going to cap intro events. So, where do you find them? You have to go to a ICAP or a CASE. And even there, it’s somewhat limited. It still doesn’t do the work you need to understand where it fits in. Right? It’s really just about, “Okay. I want private equity. This seems, like, good.”
And then, when you’re talking about, like, the interval funds, the mutual funds, and the ETFs, good luck trying to figure out, you know, what’s what, because I always use this as an example, global macro, for example. There is a macro category by Morningstar. Absolutely. Clearly has macro funds in there. You will also find macro funds in tactical allocation, global allocation. So, finding the right products, understanding where they fit in a portfolio, and just kind of sifting through to figure it out, is a problem. And a lot of alternative asset managers don’t have tons of assets, because nobody really knows how they fit in, and so they struggle to get the word out as well, because, you know, they’re not going out and being a headline sponsor at Inside ETFs. It’s hard…
Andy: Well, by the way, though, Shana, that’s helped my show, I think, because one of the things we’re trying to do on the show is get the word out, and explain some of this stuff, and do it in a more in-depth format. You know, I’m not CNBC. I’m not trying to have, like, a three-minute clip, like, “Quick, explain every intricacy of your strategy. You have 90 seconds. Go.” You know? Sometimes it takes some time. But here’s an interesting thing to me is, you know, the reality is, in the world of alternatives, there are so many, you know, asset classes even within there. You have private equity, you have venture capital, you have real estate. Just real estate in itself is huge, can be…
Shana: But there’s the idiosyncrasies beneath everything, right?
Andy: Exactly. But what I would say is this, you know, talking about advisors and their clients, I wanna start with this, and you can rebut this, you know, if you feel differently, but I’m all about, you know, portfolio models, and seeing, we want a diversified portfolio that, the drawdowns are limited, less volatility, and that also, of course, generates alpha or has higher returns for the long run. But if an advisor doesn’t understand an asset class or a product, it should not be in that portfolio, period, because if you don’t even understand it, how can you manage it? How can you communicate it to the client? How can you answer… It’s just, I almost would rather have a 60-40 portfolio for an advisor if they really don’t understand or, you know, they don’t have the time to understand these other asset classes. So, is it okay, you know, for advisors to say… Every advisor is gonna be a little different. If there’s an asset class they’re not comfortable with, they don’t recommend it, period, the end. That’s okay.
Shana: I agree that that is true, but that’s not an excuse. I’m just not gonna do it because I don’t understand it. That’s actually why I started Banríon, is I think there are a lot of advisors that don’t understand it, have stayed away from it for that very reason, but also understand there’s some value here, and would like to be more educated, and would like to be able to offer their clients these products, and be able to scale it, but they need a partner to help them. And that’s why we exist. So, we use technology to do that.
Andy: When you mention advisors, are you mainly talking about, like, independent RIAs and those sorts of…
Shana: I am. Not even just independent RIAs, but I would say any kind of advisor that caters to what I would call the mass affluent, which is, quite frankly, the bulk of financial advisors. We’re not talking about family offices or private banks. Those folks have, you know, alternatives as part of their standard offerings. I’m talking about, you know, the average independent RIA, who has $100 million to $500 million in assets under management at their firm, who is catering to a, you know, small business owners, lawyers, doctors, and understands that this is probably something they should be able to offer. But the advisors that fall into that category tend to use, as you say, models and TAMPs. They like to have… Their focus is on the relationship, on the planning, on helping people reach their goals. They’re not really, you know, portfolio managers, nor do they want to be. That’s not what they love.
Andy: Nor should they be.
Shana: Exactly. So, they’re using TAMPs, and, you know, if they’re with a broker-dealer, they’re probably using wrap programs, because it allows them to focus on what they wanna focus on and what they’re really good at.
Andy: Sorry, Shana. I’m sorry to interrupt for our non… Because we have a lot of, like, family offices, or just high-net-worth investors who are independent, self-directed. What’s a TAMP, for an individual investor? Could you explain some…?
Andy: …because I know these are more advisor terms.
Shana: No problem. So, that’s a turnkey asset management program. And, is it, I can’t remember if it’s program or platform. It doesn’t matter. So, I’ve worked for Orion Advisor Solutions prior to becoming a CIO at an RIA aggregator. And I was the director of investment due diligence. TAMPs are almost like wrap programs for independent advisors. So, they are programs that include models and recommendations to help advisors build portfolios. There’s a layer of fiduciary responsibility that the TAMPs take on to help the advisors kind of use them as sort of, like, a way to help them in the fiduciary responsibility.
Andy: So, you’re almost deflecting that?
Andy: I hate to use that word, but you’re kind of offloading the responsibility of…
Shana: To some extent. I would say most good advisors would never say that it completely alleviates their fiduciary responsibility, but it certainly allows them to say things like, you know… Those TAMPs typically serve as a fiduciary on their own in their due diligence and their recommendations.
Andy: And could I ask another question about these TAMPs?
Andy: Because, I mean, I’m not an advisor, right? So, that’s kind of my thing with the show is I’m an LP, I’m an investor, you know, so I get to ask the dumb questions that probably a lot of our audience is wondering. So, if I’m using this program and it’s spitting out an asset allocation based on whatever inputs I have, is it recommending asset classes, or is it recommending individual security? So, basically, is it outputting large-cap stocks ETF or is it actually outputting, you know, VTI, the actual security?
Shana: It’s doing both. It’s doing both. They typically will offer, like, Vanguard models, which will be all Vanguard product, or Fidelity models, or State Street models…
Andy: Or Schwab or whatever. Yep.
Shana: But also smaller firms, right? So, like, Hotchkis & Wiley might have products on there in the value space. And the TAMP might have their own models, where they say, “Okay. Here, to your point, you wanna have this much in large cap, this much in large value. And here are sort of, like, our large value offerings, and this is how we rank them, and here’s a due diligence reports.” That’s generally what TAMPs do. They typically have recommended lists. They typically have full model providers, and some that just focus on certain spaces, allowing for flexibility for the advisors that use them to do.
Andy: I see. So, I know we’re talking about both illiquid and liquid alts. So, we’re talking about ETFs, maybe, for the mass affluent, or even just the masses, and maybe private funds. But this is what you were telling me before the call, but I can kind of see it clearly now as I’m thinking about the software, which I don’t have in front of me. But that kind of a portfolio model, it’s never going to spit out an allocation to NightShares or an allocation to a hedge fund strategy replication ETF.
Shana: Nope. As a matter of fact, most TAMPs don’t have alternatives programs. I know Investnet is launching one this spring, in conjunction with iCapital and UBS. Most TAMPs will use iCapital or CASE as sort of, like, “Oh, you want alts? Here. Here’s our partner in that space.” And it tends to…
Andy: Which is fine, by the way. That’s, for accredited investors, that’s fine, but, I mean, to your point then, when you’re talking with my mom or, you know, your mom or whatever, mom-and-pop client, who may not be an accredited investor, how do they get the advantage of that kind of diversification without access?
Shana: You wouldn’t find it. You wouldn’t find it. And so that’s actually what we do and that’s the problem we solve. We use technology to drive. We have our liquid alt models, which are ETFs and mutual funds, interval funds where it makes sense. We have a white-labeled accredited investor solution, and then we have an access platform. So, all three of those things are part of our solution for advisors. And that is sort of the missing link. You have access platforms, which is accredited investor, qualified purchaser. Doesn’t cost the advisor anything, but also not gaining tons of market share with advisors. You know, CASE, iCapital, they have great, great platforms. They’re very low-cost to the advisor, obviously. No cost, in many cases. And they offer, you know, basic due diligence, but they don’t offer a lot of that educational framework on how it fits in a portfolio, but more importantly, most advisors only have, like, 20% to 25% of their book of business, and I’m talking the mass affluent, not the family office, private bank, but only have about 20% to 25% of their book of business that is accredited, even less which are qualified.
So, if your entire solution is just an access platform, your ability to take much of an allocation from any single advisor is small. And most advisors want a solution they can use with every single client in their book, because that makes their lives easier because they’re looking to scale. They’re not having, like, 10 different large-cap value managers to cover value. They pick one and that’s the model. That’s what they do. And everybody gets a little piece of that. So, what we try to do is we actually see value in having both traditional, available to anybody kind of model, and having offerings in the accredited and qualified space. Because, as I know you know, it’s just a bigger universe of offerings, and because you don’t have to worry about that daily liquidity, and the constraints of the 40 Act, which actually constrain the strategies themselves, you have a much better mousetrap, and better way to gain that access, and a lot more to choose from. So, what we try to do is have a product that solves for, like, the accredited investor, a qualified purchaser world. And then we create sort of pari-passu, in parallel, a 40 Act model based on the same exposures.
Shana: So, at least for the advisor, the exposures are the same across their book of business, where they know if this client meets these criteria, I’m gonna put them in this one, and if they don’t meet that criteria, we’re putting in that one, but they’re running similar portfolios, so they’re getting similar exposures.
Andy: It’s interesting. I mean, I love the idea, first off. I love it. But I’m going back to 10 years ago, when I read Meb Faber’s book. So, and I actually just pulled it up in my web browser here. It’s called “The Ivy Portfolio: How to Invest Like the Top Endowments and Avoid Bear Markets.” And we had Meb on the show, we talked about the book. It really influenced me. And it’s probably one of those things, like, if I hadn’t read this book, I probably wouldn’t be doing this podcast today, right? But the theme of the book, you know, at the really illiquid end of the spectrum, you have the Yale Endowment and the Harvard Endowment, and these, you know, massive endowment funds that are buying timberland and farmland, and, you know, allocating to venture capital, super, super illiquid stuff, that is generating alpha, and that has, like, no liquidity whatsoever, but it doesn’t matter because their time horizon is, like, forever.
Andy: Yeah. They have these huge endowments. And this, I think it was published around 2010, 2011, but what Meb was pointing out in the book was there’s starting to be ETFs that can replicate some of those exposures, so I don’t know if it’s still around, but was it CUT, C-U-T? Was that, like, the Timber ETF or whatever?
Shana: Yeah. Some of those things don’t exist anymore. There was a boom and bust, where if you went in ’09, 2010, there were thousands of offerings in the space, and then none of them were able to gather assets, for a lot of reasons.
Andy: Some of them…well, some of them did. Like, Teucrium is still around, you know.
Shana: Yeah. Some of them absolutely did. But I would say the vast majority did not, and so they kind of opened and closed. A lot of the ones…
Andy: But my point is, though, it’s, like, that idea was around then, but now we’re in, I would almost call it, like, the third wave or fourth wave of ETF issuance. And there’s just so many more liquid products out there to actually do this, because when I read the book, as you kind of pointed out, it was, like, almost a little bit ahead of its time still. And now I feel like this is actually the best time ever for liquid alts. Would you agree with that?
Shana: Yeah. And it’s funny because I actually wrote a white paper before Meb wrote his book…
Andy: Okay. All right. No. I’m gonna…
Shana: …called “The Benefits of Investing in Alternatives.” And it’s the same premise. I’m not Meb Faber, so it didn’t get quite the fanfare. And it wasn’t a book, it was just a white paper.
Andy: But you’re the Queen of Alternatives, so, I mean, you’re up there. Come on.
Shana: If you google it, it does show up. Schwab and Fidelity did at one time distribute it to their advisors. And it was a similar thing. I kind of came to that realization that’s similar to Meb right around the same time. I was working for an RIA, I was building their alternatives platform, and I was very much doing what we do at Banríon, which is I built out the private version, and then I built out, you know, a more accessible, publicly-accessible offering. And subsequently, I had the chance to see, you know, people from the Yale Endowment, people from the Harvard Endowment talking about this concept, and how, you know, their cashflow needs are minimal, like, non-existent, quite frankly, because they have very minimal need to pay out anything. So they have unlimited time. And that’s really different from the average individual, who does have some time constraints and liquidity is a problem.
And I’ve written some things for the CAIA Association about the alpha that exists in illiquidity, if you’re willing to take it. There’s many different things that just can’t mark to market. That doesn’t mean that they’re completely illiquid. It doesn’t mean you couldn’t get your money in a month or quarterly, but I do think for some people that’s intimidating to lock your money up in that way. So, yeah, having the proliferation of products and now interval funds, which allows for, you know, the average person to be able to take advantage of less-liquid product, in a wrapper that is accessible, is, you know, the latest and greatest. The only thing I have to say about interval funds is even though interval funds can be done for everybody, a lot of interval funds do actually stick with the accredited investor hurdle, for, you know, business and operational reasons. So, not all interval funds are available to everybody. They could be. There’s no reason they couldn’t be. And, you know, I think that that can be intimidating.
Andy: Well, Shana, I wanna ask you. I’m gonna go off-script, and I’m gonna ask you about interval funds, okay? I have this thesis, and I haven’t really fully worked it out in my mind yet. But, you know, we’ve talked about closed-end funds, interval funds, a little bit on the show lately. And I don’t have any problem with interval funds. In fact, I like them. But I think that there may be a problem with interval funds in the market, in the sense that they almost are, like, half-pregnant, in the sense that, are they liquid or are they illiquid? And again, there’s no problem if it’s explained, but it almost seems to me that, you know, let’s say there’s a firewall, a monthly or quarterly firewall in redemptions, where you kind of wonder if are they being sold as something that’s pretty liquid, when in fact, in reality, it may turn out that they’re not that liquid.
I mean, I don’t know. That just kind of gives me pause. And the fact that you work with so many advisors, do you see that as a particular problem with interval funds? Because, like, with ETFs, it’s like, “Look, they’re liquid. They’re liquid, period.” All the problems that comes along with that. In illiquid, certain private equity funds, they might have a 5 or 10-year hold. You know that going in. Interval funds, I kind of wonder, does everybody totally understand how these work?
Shana: So, I will be honest. I am not a huge fan of interval funds, because most of the ones that I think are any good are at a accredited investor hurdle. And I just feel like I can go into sort of an LP product, a hedge fund product, and get similar liquidity, and have a greater universe, without any sort of 40 Act constraint. Because they still have some constraints under the 40 Act. I will say that one of the key things you have to look at with interval funds is the same thing you have to look at when you look at, you know, the private LP funds, is, that hedge funds have, is that you need to look at the underlying and does the liquidity make sense? Like, this is such an important thing. People worry so much about, like, “Oh, it’s monthly liquid, and that fund’s quarterly liquid, and they’re both, you know, asset-based lending funds.” But seriously, look at the underlying. I understand that that guy might be using monthly because he can market that, and maybe he has a larger asset base, and he feels comfortable with that, but is it realistically, how liquid is that portfolio? And that’s where due diligence becomes such a huge component. What you get…
Andy: So, you’re talking about what I’m talking about, which is, like, sure, these are liquid when everything goes right and…
Shana: Right. But when everything goes wrong…
Andy: …when everyone understands them, they’re very liquid. What happens when it goes wrong? And, additionally, what happens if the investors, clients don’t…
Shana: Yeah. And that’s actually… The key is I don’t even care if it is a 40 Act product. I still do the level of due diligence I would do if it’s a private fund, because even in the 40 Act space, like, let’s look at, you know, two different mutual funds, and, you know, a lot… Like, IndexIQ, like I said, one of the first that came into the business, their entire suite of product is really replication-based, which is really different than, like, actually implementing a specific strategy. They’re looking at a return stream, and they’re saying, like, “How do we replicate the returns based on what we know about that?” which is a completely, you know, reasonable way to approach things, but that’s really different than, say, AGFiQ, where they have market-neutral funds, where they are actually long and short stocks, and they are actually market-neutral and they’re not trying to replicate a return stream. They’re actually doing the strategy.
And both of those things exist on the market, and you have to understand those things. These are complex products. You do have to do your due diligence. It’s not like picking your favorite large-cap fund. You do have to do more due diligence, which is why, like I said, Banríon was founded to help advisors do that. We do the due diligence. We make sure we understand, so that we can implement the most appropriate thing for the client. And that is also liquidity. You can have 40 Act products… Third Avenue is a perfect example. That was a fixed income fund in the distressed space that, as you said, when everything doesn’t go right, when everything goes wrong, they actually couldn’t be daily liquid. And from that experience, interval funds kind of came into existence.
Andy: But, I mean, are we having the same problem again, though? Like, what do you think about the BREIT situation?
Shana: No, you still have the same problem.
Andy: Can we talk about BREIT?
Shana: You still have the same problem.
Andy: Do you have BREIT in any of your model portfolios, or?
Shana: No. As a matter of fact, I actively told people a year and a half ago that they shouldn’t be investing in BREIT.
Andy: Tell me more. Why did you…
Shana: Nobody listened to me. I thought that was a product that had a lot of problems. Did I necessarily see the problems that came to be? No. But I felt like there was a lot of uneducated money in those products because it was Blackstone. And it was on ICAP. It was on CASE’s platform. So, it was easily accessible. So it was attracting a lot of money of people who didn’t fully understand the product, which I always think is bad. One of the things I look at when I invest in anything is who else is in the foxhole with me, especially if you’re less liquid. Because that matters, because behavior of different types of investors at times can be vastly different.
Andy: Well, totally. And that’s what I mean by being half-pregnant. So, ultimately, if there’s a firewall that says, “Look, at the end of the day this is not liquid,” but if the investor investing thinks that it is liquid, even in a time of turmoil, there’s now a mismatch between the structure of the investment and its redemption options versus the expectation of the investors. And as you pointed out, that’s a problem.
Shana: That is a problem. But that’s why advisors in the space who do wanna be there should rely on, and in the paper I wrote in 2010, “Benefits of Investing in Alternatives,” like, the last sentence of that paper is, “If you wanna play in this space, you need to work with a professional,” because these are all considerations, and you have to be investing with and working with someone who understands these things, because what will happen to an advisor is they’ll put money in BREIT because it’s Blackstone and it’s on ICAP and it’s on CASE… And that’s not to say CASE or ICAP did anything wrong. BREIT was used by everybody. So, like, these are not… I think is it…
Andy: Yeah. Shana, it reminds me of the saying in IT, like, “Nobody ever got fired for buying IBM.” It kind of feels like, you know, nobody got fired for buying BREIT.
Shana: Well, there’s a saying in a book about Paulson. And it’s super old. It was right after the financial crisis. So, on one of the pages, and I can see it in my head… And a gentleman from “The Wall Street Journal” wrote it, Greg… Name is escaping me. Anyways, in the start of one of the headings, it says, “It’s better to be right with the crowd than wrong on your own.” Or, no. “Better to be wrong with the crowd than right on your own.” And essentially, he’s saying that, like, Paulson won, ultimately, and made a ton of money, but he did it alone, and in many people’s eyes by, like, profiting from other people, and a large amount of people, being hurt. And I think that there’s something to that.
So, BREIT, because it was Blackstone, because everybody was in it, there’s a little bit of that going. But I will say there’s plenty of academic research, and my personal belief is that I would rather be with a smaller, more niche player in some of these spaces, especially when it comes to things like commercial real estate, where geography matters, and having specialized understanding of specific geographies can be really helpful. I know I’ve worked in the past with a white-label product that only focused on commercial real estate and net lease options that were Midwest, and they were super boring, but the product was very good and people were very happy with it because it was just the people who managed it were so well-known.
Andy: Boring is good. I got no problem with boring.
Shana: Boring can be good. Some people get really caught up with being able to say that they can offer Carlyle, Blackstone, and, you know, Millennium, because people know those names, and it feels exclusive and special. But quite frankly, I think most of the best players actually fly under the radar. And they’ll never make the headlines, and that’s actually a good thing in this space.
Andy: Totally. So, the portfolio models, I understand, you know, Banríon’s helping independent RIAs and advisors, providing them with portfolio models or structures where they can allocate to alts on, you know, the accredited investor, high-net-worth, ultra-high-net-worth, but then also, you know, simultaneously, kind of in parallel, the non-accredited investor portfolio model. So, are you recommending just allocations, or is it all the way down to, like, individual ETF-level investment selections?
Shana: Individual ETF levels, that’s exactly what we’re doing. We are recommending allocations and then we select product. And then for what we hope to do, and kind of our goal is, you know, in this environment, with advisors where relationship focus is so important to be able to maintain strong bonds with your clients, and be able to offer them, like, a very unique and specialized experience. I like to be able to do this. And then the secondary thing that we like to do with our advisors is be able to sit down with the clients and work on aligning alternative solutions for value-based investing.
So, I’ll give you a perfect example of what I like to do with advisors. We have our models to help them scale, and then that allows us to sit down with specific clients and say, “Mr. and Mrs. Smith…” or Mrs. Smith is a single mom. She runs her own business. She has a lot of money. And she is very, very, very passionate about helping women build businesses. So, we’re gonna go out and find a microfinance, you know, fund that helps women in Africa build their own businesses. So, we’re gonna value…help find solutions that align with the values of the clients. Because we’re able to scale their book of business, we can offer these kind of things. And we have a suite in our access platform where we focus on having lesser-known managers, that are operationally efficient enough that they pass our hurdles. And we do due diligence on all of our private funds to get on our platform.
But we have a suite of solutions with our strategic partners, which are smaller managers that offer some of this niche opportunity, but also because of our expertise in the space, and I have a team around me, my chief investment strategist, Victoria, she has substantial experience in the alternative space, working for the Illinois Treasurer and then working for Allos Ventures. She has tons of experience looking for these kind of things as well. Through our network, we’re able to help advisors build out these value-based solutions for their clients and what is important to them. So, one of the RIAs we work with is very passionate about helping women and minority investors, and to help promote those communities in ways, in order to provide them financing, capital, and help them, you know, improve generational wealth possibility. And so they are very passionate about finding managers that align with those beliefs, and we can help them do that because we’re able to scale things through our technology and through our strategic partners in our network.
Andy: I love that. Even just the willingness to engage with and research emerging managers, right? Because we can’t sit here, on the one hand, and say, “Everybody invests in BREIT,” and then on the other hand say, “Well, we can’t afford to do due diligence on emerging managers.” I mean, the fact of the matter is also, even just from a ROI standpoint, in my opinion, it is some of the smaller…maybe we could say smaller and mid-sized managers. And as you mentioned, like with commercial real estate, having a geographic focus, I do think a lot of times there’s gonna be stronger returns, kind of, beneath that top level, right? Like, when you need to deploy capital a billion dollars at a time, you’re frankly…the returns are just not gonna be potentially as high as when you can focus on those more niche opportunities, but you have to have folks who are, you know, sitting in the decision-making seat, or in the research seat, who’s willing to even look into emerging managers, right?
Shana: Yeah. And that’s kind of where we focus. And the thing is, if I have a client that says to me, “No, my customer really wants to be in Blackstone,” or, “My client really wants to be in Carlyle, or Bain,” I know people that I can make that call. So, it’s not a matter of, “Can I get them access?” because I can. That’s actually quite easy. It’s the emerging managers, the smaller manager, the more niche managers, that vet more focus, where we can better align values, that are harder to find, but that’s what I’ve spent the last roughly 10 years of my career doing. So, I have quite the network and I know where to find these things and who to call. And I think that that’s more of a value proposition for the average advisor than me saying, “Well, I can get you…” It’s not hard to get into the Blackstone or Carlyle fund. Now, mind you, sometimes the access platforms can offer you lower minimums. That’s absolutely true. But it’s not hard to get in those funds if you know the right person to call.
Andy: Yeah. Speaking of, you know, emerging managers, emerging leaders, I was on your website. I went to the About Us webpage. And if I saw correctly, you have an all-female team. Is that the case?
Shana: We do. We do have an all-female team.
Andy: So, that’s really unique in this industry. Can you tell us more about that experience in building and leading an all-female team?
Shana: Sure. So, I’m very passionate about helping women in finance, through mentorship as well as, you know, through financial literacy program. So, I’ve been a member of Investing Girls, where I serve as a mentor for young girls in high school, to help them, you know, understand potential career opportunities, career paths in this field, offer internships and opportunities to kind of shadow what I do and find opportunities with people that I know for them to get to know the industry. I did something similar with Rock the Street, Wall Street over the years. And so that’s always been something I’ve been very passionate about through the financial literacy program. So, I’m also co-chair of the Women in ETF Speakers’ Bureau. And the Women in ETF Speakers’ Bureau and Women in ETF, in general, their key mission is to bring more women into senior roles in investing and things of that nature in the industry, and to have better representation. Speakers’ Bureau’s goal is to have better representation of women on main stage at major conferences.
I’ve worked with Choir, which is another organization that has a similar goal is to improve minority and women representation in the industry. And a lot of people don’t realize. Finance, in general, in terms of male-dominated STEM-like fields, actually has better representation than most. It’s still not great, but it is better than most. And we as an industry have actually spent a lot of time committing to this, and I think that that’s a good thing. But for me, because I’ve been a mentor over the years to so many women, and because this is such a passion for me, when I was building my firm and I was thinking of who I wanted to hire, when you’re, we’re starting a new firm, you know, you want the people you hire to be kind of your right hand, to be people you can trust implicitly. Like, because they’re gonna have to do a lot for you, and you need to know that, like, they’re not gonna stab you in the back, you’re not gonna have to spend a lot of time, you know, teaching people and getting them up to speed. So, when I was looking to build my team, I focused on the people that I had those kind of relationships with, which happened to be young females.
And so, Victoria Bills and I worked together at Ariel Investments a million years ago. She had just graduated from college and I was sort of assigned to be her mentor there. And so I went from being her mentor to us becoming actually close friends, and I helped advise her through her journey, you know, with the Illinois Treasurer’s Department and with Allos. And so when I started the firm, she was a free agent, and I was like, “You need to come work for me. I don’t know how I’m gonna make it happen, but you have to come work for me, because I can’t imagine doing this with anybody but you.”
And then Brittany Mason is a friend of mine who I’ve known for a very long time. We have an Irish connection. She lived in Ireland for a long time. She ran the Miss Universe Ireland organization, which is actually an extremely operationally intensive, and quite frankly, difficult type of business to run because your entire ability to build and grow and be profitable in that business is your ability to recruit contestants and recruit sponsors, getting people to give you stuff for free. And that is extremely intensive. You have to have… It takes a special person to be able to do that successfully. She did it extremely successfully. She wanted to get into finance. She was working in the mortgage business for Rocket Mortgage. And she was kicking butt. She was the top-performing female broker in her region. But she wanted to get into something that wasn’t mortgages.
And so when I had the opportunity to bring somebody on to handle kind of administrative, business development, and marketing, she’s the first person that came to mind. Again, somebody I could really trust. And so it was a concerted effort for me to focus on women who I know could be trusted partners for me, and want to commit to build the business. But I also think that there’s something powerful about having three younger women out there doing something as complicated as alternative, as experts. And we don’t apologize for being women. Like, we are very proud to be a full-female team. And that’s not to say we won’t add men to the business. I know we will. But I think starting off and kicking off with this focus is really important to me, and something I’m super passionate about.
Andy: I love it. I love the positive energy. I mean, from my standpoint, you know, the kind of corporate top-down ESG stuff is not for me. Like, I can’t stand any of that stuff. But on the other hand, I see so many, you know, female entrepreneurs, and, like, your team, all-female team, it’s more bottom-up, you know, grassroot, and talking about clients who wanna invest with certain types of objectives, social goals, impact, and all that stuff. I hate it when it’s top-down. I’m not gonna lie. But I love it when it’s bottom-up, you know, with, like, folks like you who are building the team that you wanna build, serving the clients that you wanna serve. I think that’s wonderful, and I really appreciate your energy. I can definitely see why you’ve been named the Queen of Alternatives. I think that’s well-deserved. I know some other women that we’ve had on the show who are very high up there, but, you know, like, we’ve had Kelly Winget and I’m like, “Well, she’s the Wealth Alpha.” So, you know, she can be the Wealth Alpha, you’re the Queen of Alternatives. I love it. And that being said, we have a lot of advisors in our listenership. I’m sure many of them might be interested in the services you provide at Banríon Capital Management. So, where can they go to learn more about your firm and the service offerings?
Shana: Sure. So, they can go to our website, banrioncapital.com. It has a summary of some of our services. I also encourage you to reach out to me, you know, my first name, [email protected]. I don’t mind giving out my email address. If you have any questions or concerns, I’m happy to hop on a call and kind of walk you through everything. I always try to do a demo of our tech portal for anybody who’s interested, because I really think, you know, that’s kind of, in addition to all the things we’ve talked about about how we’re kind of doing things differently, our tech portal is sort of a…it has that TAMP feeling, but it also has a social media feeling. It’s a nice little ecosystem where everything can exist in a way that’s really easy to communicate with our clients.
It also allows our clients to have access to things they would never have access to through their traditional offerings of technology in their tech stack, things like being able to do analytical work where you’re shorting and using leverage, being able to screen databases of hedge funds in, you know, alternative product. We have data sources where we screen for that kind of thing. And then we have our access platform there, where you can see our managers and get more information, see their research, and everything’s kind of in there. And, you know, I like to be able to show you that, show potential clients that, and there’s also a test drive function on our website, if you just wanna take a quick peek as well.
So, that’s how you can find us. Go to our website, email me. I’m happy to set up a quick call, walk you through a demo, and see if there’s ways that we can help you and your clients. I really think that the services we’re offering are scalable because of technology, but we’re able to offer a really white-glove experience, where we can be your trusted technical expert, to make your lives easier with your clients because we hear time and time again from advisors that the number one reason that they’re not in this space is what we talked about in the beginning, “I don’t wanna invest in something I don’t understand.” But this is of value. This is a way to set yourself apart from your general competition, and we wanna be that partner that helps you get educated yourselves, but serves as that technical expert along the way.
Andy: I love it. Shana, I love your energy and just willingness to share your knowledge freely. And I’ll be sure to link to all of those resources and your website in our show notes as well, so listeners can easily get in touch with you. And thanks again for joining the show today.
Shana: Thank you.