RIAs Embrace Best Practices for Fund Platforms
May 7th, 2018
May 7th, 2018 MLGCAPITAL: As registered investment advisors (RIAs) continue to seek new strategies to add value to their clients’ portfolio, private real estate has continued its’ rise in popularity. Clients engage with you on offerings they see in the marketplace. You see online crowdsourcing opportunities becoming the norm. How do you, as an RIA, delineate between realistic and unrealistic assumptions in these offerings? There is also the challenge within this fast-growing asset class of how to allocate to private real estate within your existing investment platform. Does the offering fit into your traditional allocation ‘bucket’ for due diligence? Do you need your investment committee to review the offering? Does your custodian need to approve? All valid considerations for RIA’s watching the lucrative private real estate asset class.
According to a recent survey conducted by MLG Capital, today’s RIAs are meeting the challenge and ‘taking the high road’ for clients. Survey results report that, if an alternative investment product would benefit a client, but the asset manager is not on the RIA’s platform, an overwhelming majority (80 percent of respondents) would introduce the asset manager to the investment committee and work to get the firm or Fund approved on their platform.
The 8O% figure is especially impressive considering the obstacles RIAs often face when introducing alternative investment opportunities such as private real estate. Typically, it can involve a labor-intensive process fraught with paperwork and compliance approvals. It seems logical, therefore, that RIAs would steer clear of introducing new opportunities. Yet the facts speak for themselves and the RIA industry deserves a pat on the back for doing the right thing.
Indeed, MLG Capital’s conversations with RIAs nationwide reveal overwhelming support and dedication to fair treatment of their clients and a continual search for attractive new investment options. As long as Fund materials, performance, management, risk, fees, compliance and other important considerations are able to pass a stringent approval process, RIAs report willingness to investigate the addition of private real estate to the platform. In addition, RIAs insist on ongoing reporting to assess how the Fund is performing and meeting client needs. Thought leadership and intelligent, well-conceived marketing materials and industry insights also appear to capture the attention of busy RIAs seeking to educate their clients.
The uniqueness of private real estate is also an advantage in that it adds value to RIAs who seek to offer something new and different to clients. With the number of RIAs up 12 percent per year since 2005*, there’s more competition than ever and a concomitant need to develop new ways to stand out. As a result, more and more RIAs appreciate the value of private real estate as a means to diversify while offering low correlation to the public market and a potential hedge against inflation with a similar profile to bonds’ long holding period and illiquid structure. Take a look at the below correlation chart with inflationary impact. Notice that in inflationary cycles, private real estate outperforms even gold, because of current income from rents. After all, if there is an inflationary cycle it’s common for wages to also rise, causing increases in rental rates.
It’s not often that RIAs have a private real estate advisor they can truly trust, and that’s where firms such as MLG Capital come in. By doing the right homework, it is possible for today’s savvy RIAs to identify the best private real estate partner to advise on a truly diversified portfolio. It’s essential to conduct high-level due diligence and ask detailed questions related to experience, team of experts, historical ability to weather through the storms, and ability to deliver consistent returns though every market cycle before considering adding the manager to the investment platform. Clients depend on it. Take a look at a recent blog post titled, “17 Questions to ask before investing your money” for a high level on questions to consider when investing into the private real estate asset class.
MLG Capital is currently on its third fund, MLG Private Fund III LLC**, a $150 Million equity fund that is accepting new accredited investors. The series of MLG Private Funds were formed to acquire, directly or indirectly, a geographically diverse portfolio of commercial real estate. Primarily consisting of Commercial multifamily properties, Industrial, Retail, Office, and other opportunistic opportunities located in strategically identified areas throughout the United States.
Since the inception of MLG Capital in 1987, we’ve had active, exited, or pending investments of approximately 14.5 million square feet of total space across the United States, inclusive of approximately 11,00 apartment units, with exited and estimated current value exceeding $1.3 billion***
MLG Capital’s series of funds target cash on cash yields, quarterly distributions, and appreciation over time to deliver consistent investor returns in the 13-15% net IRR range. Many RIA’s seek informational resources for their clients in the private real estate space. MLG Capital has produced various content pieces. These materials are available on the Harvest platform via : http://www2.mlgcapital.com/harvestprofile
Past performance is never an indication of future results. As always be sure to complete your full due diligence on any investment. This is not an offer to sell a security or an interest in any offering being made by MLG Capital, or its affiliates and is intended to solely be a resource of thoughts, opinions, and materials to use in educational aspects of private commercial real estate investing.
**Offers to sell an interest in an offering of MLG Capital or affiliates will only be made to a qualified purchaser by the delivery of a confidential private placement memorandum and current supplements, accompanied by a subscription document booklet. Please reference confidential private placement memorandum and current supplements for full details of investment.
*** as of 3/5/2018. Value is consistent of disposing of assets as well as the current internal valuation of currently held assets as of 12/31/2017. Values may not have been reviewed by an independent 3rd party and may be internal projections.
Investor Relations: Kathleen Pecard, Investor Relations Manager, Kpecard@mlgcapital.com
LJH Financial Marketing Strategies