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How Technology Helps Family Offices Invest in Alternatives
August 18, 2023
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In today's market, family offices are increasingly open to adopting alternative investments. Alternatives can provide valuable returns and can hedge against market volatility, but they of course come with a host of challenges and risks. Fortunately, advances in wealth tech have made it easier than ever to overcome these challenges, allowing family offices to safely reap the benefits of alternative investments.
Here’s what you need to know.
Key Takeaways
Diversifying Your Portfolio with Alternatives
Alternative investments provide family offices with a unique way to diversify their portfolio. This type of investment also tends to remain stable during periods of market volatility because they are disconnected from traditional stock markets. Because of this, some family offices view them as an especially appealing option.
However, these investments can prove risky and difficult to manage. This is due to several factors, such as:
- Illiquidity: Alternative investments can be highly illiquid, as they may not be readily sold or converted to cash without a substantial loss in value. This illiquidity can make them a challenging fit for family offices that need flexibility and access to funds on short notice.
- Lack of Transparency: Unlike traditional investments, alternatives are rarely required to produce public reports and disclosures. This lack of transparency can make it difficult for families to obtain the necessary information to assess performance and avoid risks.
- Regulatory Risks: Some alternatives may fall outside the typical regulatory oversight that governs traditional investments. This lack of regulation can increase the potential for fraudulent activities or mismanagement, leaving investors with limited legal recourse.
- Manual Management: The traditional process of managing distribution and capital call documents for alternative investments is labor-intensive and time-consuming. Manual data entry increases the risk of errors, potentially leading to misrepresentations of financial performance.
In the past, these hurdles have prevented many family offices from embracing alternative investments despite their benefits. The good news is that modern wealth management technology has removed many of these risks and headaches, helping family offices take full advantage of alternative investments.
How Wealth Management Tech Paves the Way for Alternative Investments
1. Streamlined Data Processing
Some wealth management technologies leverage artificial intelligence to automatically ingest and process data from documents related to alternative investments. This automation removes the manual labor traditionally involved and reduces the margin for error, allowing for faster and more accurate management of any investments.
2. Integrated Portfolios
Rather than treating alternative investments as separate from the rest of the portfolio, some wealth tech platforms allow families to view all investments in one place. This integration provides a clearer picture of the overall portfolio's performance, risks, and correlations.
3. Customized Reporting and Insights
Wealth tech platforms can provide customizable reports on individual assets and full portfolios. From performance metrics to compliance monitoring, these reports give family offices priceless insights into the state of their portfolio. By making use of these insights, wealth managers can measure the health of their investments and plan accordingly, tailored to suit their specific needs.
4. Real-Time Monitoring and Alerts
With real-time monitoring and alerting capabilities, family offices can stay on top of changes in their alternatives portfolio. Whether there's a sudden shift in market conditions, or an unexpected opportunity has opened up, technology ensures that family offices are always informed and up-to-date.
5. Enhanced Risk Management
By leveraging advanced analytics and real-time data, wealth tech solutions help family offices identify and understand the specific risks associated with alternative investments. This enables wealth managers to make data-backed decisions and avoid potential risks.
6. Lowering Costs
By automating labor-intensive processes with machine learning tools, wealth tech tools can help family offices reduce the overall costs associated with managing and investing in alternatives.
Embracing Alternative Investments With Confidence
Wealth tech is empowering family offices to explore the vast opportunities presented by alternative investments. By replacing repetitive and error-prone labor-intensive processes, centralizing information, and enhancing monitoring, technology is reducing the barriers and risks associated with these investment opportunities.
For the first time, many family offices are confidently venturing into alternatives, enjoying the benefits of diversification without getting bogged down by the usual problems. And in a world where the financial landscape is continually evolving, using technology to stay ahead of the curve isn’t just a luxury—it's a necessity.
If you’re ready to use modern technology to optimize your investment strategy, Masttro can help.
Masttro is a cutting-edge wealth tech platform that offers a complete and transparent view of wealth. With a focus on real-time control and clarity, Masttro equips wealth owners and those who serve them with the tools necessary to make informed financial decisions. From liquid and illiquid investments to liabilities to passion assets, Masttro encompasses a broad spectrum of wealth components. Features include:
- Robust data ingestion of liquid and illiquid assets
- Custom reports and a report builder
- Multi-platform support for all stakeholders
- Industry-leading cybersecurity measures
- Stringent data protection standards
Founded in 2010 by a team of wealth management experts, Masttro has become a major force in the wealth tech industry. Today, the platform serves a wide range of businesses around the world, including family offices, wealth advisors, professional service firms, and prominent financial institutions.
Want to learn how Masttro can provide you with the best tech setup for managing your clients' wealth? Click here to schedule time with one of our wealth tech experts.
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