Accessing Private Markets With Clarity and Confidence with Rich Boghosian

I appreciate you having me.

[00:00:31] Doug Heikkinen: We like to start out with people's journey. So give us a little bit about that and what inspired you to co-found PeakAlts and how has your experience across private equity and investment banking shaped the firm's mission?

[00:00:45] Rich Boghosian: Yeah, happy to. And maybe start with my background and get into a little bit around the basis and impetus to start PeakAlts. So personally I've spent my entire career in the investment space. Started out doing investment risk management out of the GFC, which is a fascinating time to come out and really dig into underlying assets within portfolios and funds and build out a good investing baseline.

From there I went into the investment banking world, as you mentioned. Spent a few years working a couple different functions primarily around M&A advisory. So I got to work through really the full process from sourcing deals, through diligence, through executing on transactions, and took that experience into private equity, which is where I've spent the bulk of my career, the last decade, as deal execution professional across a variety of different strategies with growth investing, LBOs, but really the A to Z of investing both minority and majority transactions across a number of different end markets. So we got a very good level of experience through that and certainly helped me into the position of co-founding PeakAlts, with my partners, to bring that experience to bear.

And a little more about us. We are solely focused on private markets, alternative assets. We are first and foremost investors. As I said, I come from more of an equities background. my co CIO and partner comes from more of a credit background. He and I look at everything together. We bring in those two sides of how we look at everything and have our focus, which really helps us inform the decisions we make on what investments are gonna be attractive, from that top down of what asset classes are interesting today. Within those, what strategies are interesting. And then how do you select within those who's the right manager and what's the right structure for an investment? So we've built our careers around that and are bringing that experience to bear with PeakAlts and serving a client base that, we're very happy to partner with and, bring that experience to help 'em in their journey of investment.

[00:03:01] Doug Heikkinen: As I mentioned, you work with RIAs and family offices to bring access to alternative investments, so what makes your approach to private markets different from what most advisors might be used to?

[00:03:14] Rich Boghosian: Yeah, I think a big piece to that is, as I mentioned, we're investors first and foremost. We are focused on how we identify the best net risk adjusted return across asset classes for our clients.

We are totally independent. We do not have investment manager ownership or investment. So we're not forced to place product. We can go out and our selections are based on what we view as being the right and best investment. To that end, we don't charge placement fees to managers. We have no negative selection bias that we're getting incentivized by a manager to bring their product out and raise capital.

So it's again, focused on what is going to be best performing for our clients. And at that we are personally invested in everything we do. We have full alignment and incentive with our end clients that everything that they're seeing, we're seeing and doing ourselves too. We bring a very collaborative, long-term partnership approach to everything that we do.

[00:04:14] Doug Heikkinen: So, many advisors are looking for ways to better diversify their portfolios and, manage risks, and with access to alternatives like never before, it's more possible to do different things. So how do you feel alternative investments fit into that conversation in today's environment?

[00:04:31] Rich Boghosian: Yeah, it's a huge piece of today's environment.

If you look back 30 years there were twice as many public companies as there are today, 85% plus of companies with a hundred million of revenue or more are private today. So there's a huge part of the market that if you're just investing in publics, you're not accessing that. There's a lot of growth there.

There's a lot of alpha generation opportunity and it's becoming critical to have that component of your portfolio. And the data also proves out that with a mix of alternative assets or private market investments within your portfolio, you're able to generate a higher return at a lower risk, lower volatility profile.

That's all well and good, but at the same time, you can't go out and just say, okay, great. I've got now my 20, 25%, whatever the number is of alternative investments in my portfolio. The dispersion of returns in private markets is large, and the importance of manager selection and strategy selection is key to finding success there. And that's really where we come in of supporting that investment manager selection process. Because of the diligence and the process that we have from identifying and sourcing investments to completing our diligence, to structuring the right vehicles to invest in those products is, key.

And you can't go out, as I said, and just allocate and not really understand what you're investing into.

[00:05:59] Doug Heikkinen: You mentioned due diligence and that's one of your firm's calling cards. So what is that institutional level of due diligence and maybe bespoke structuring, and what does it mean in practice for your advisor and family office clients?

[00:06:14] Rich Boghosian: Yeah, absolutely. And that goes from everything. I've touched a little bit about our top down approach, but that covers everything from identifying what asset classes are most interesting today. We're in a very interesting macro environment, geopolitical risk, inflation, interest rates. So there are a lot of factors that we think about at the top level, before then we go out and canvas the world of what managers are actually operating within these asset classes and these strategies.

So it gives us a great perspective in our diligence to have benchmarks, understand who's out there doing what, what does historical performance look like, what does the team and strategy look like, and how are they going to be deploying capital in today's environment? We bring that in. So, my background, spent years underwriting single name assets.

I've worked for a couple different firms, so seen a variety of different approaches to investing on the equity side. My co CIO, Josh. Has come from a credit background. So a lot of similar experience in underwriting managers and deal opportunities.

We bring all of that to bear in what we're looking at. For our investment opportunities, as you said, it's a very institutionalized process. We're in depth. We go very deep into what we are trying to accomplish, and within that, we're getting into that layer, probably further down than your everyday allocator might be looking at.

With the work that we do, we're very proud of our process. even if it can be very detailed and it takes time. But at the end of the day, we want to ensure that we're making the right decisions for not just our client's capital, but our own capital.

[00:07:56] Doug Heikkinen: With all the noise in the alternative space, how should advisors evaluate managers and strategies to ensure they're aligning with client goals and not just chasing trends?

[00:08:09] Rich Boghosian: Yeah, it is a good question. And trend chasing can be difficult. I think there's this whole movement around democratization of alts and private market investment opportunities.

And in some ways that's great. I think improving access to a broader group of investors is a very positive thing. At the same time, I think it can be dangerous as you think about products that can hit market that the end investor might not be aware of what's actually within that product. What is semi-liquid or an attempt at being liquid actually mean when those products really aren't as liquid as investors might be thinking.

When you think about lockup periods or what's allowed for quarterly redemptions. So there's a big education component around understanding the alternatives world and what it means when investors are coming into these products and what exposure they're actually getting from it. Is it solving the needs that advisors are looking for from a end client diversification standpoint?

And that's going to vary by every client too. And I think the advisor's job is very important here as they think about what investments they're bringing out to their clients. And I think it puts an emphasis on this manager selection and strategy process of going through the diligence, going through the reps to fully understand what investments are out there and what that means for a portfolio.

[00:09:32] Doug Heikkinen: PeakAlts covers a broad spectrum, private equity, private credit, real assets, esoterics. Where are you seeing the most compelling opportunities right now and what's driving that?

[00:09:44] Rich Boghosian: Yeah, and we're seeing a lot of attractive opportunities across asset classes today. Within that, I think there are a few areas that we've dug in and our focus has also been on investors that have had success investing across market cycles.

I think there's a lot of uncertainty today in the market, which is hitting both the public side and the private side. But the importance of coming down, of having a defined strategy, folks who have experience within that strategy and can execute on it, regardless of the market environment, is important.

We, to tick through, have spent a lot of time around middle market private equity and lower middle market private equity, where there's a lot of alpha generation opportunity for investors that have experience in value add investing and operational oriented strategies, can help inflect more change in our organization and get them on a higher growth path or be able to exit at a position that's at a higher valuation than entry. On the credit side, we've seen a lot of interesting opportunities around asset backed lending as well as opportunistic credit strategies. We're also looking at distressed, which we think is a very interesting, kind of a side pocket investment strategy for folks, that are market driven. If there's an event in the market, then that capital gets deployed and provides a good uncorrelated return strategy for investors that may not otherwise be available to them when you're looking at broader public market investment opportunities. I think another area is secondaries investing, which has been a large trend as well.

We think there's a lot of good opportunity there from where capital sits today supporting secondaries transactions versus where the demand is. There's still a lot of emphasis on quality within those transactions for both LPs, are looking to get liquidity as well as GP led secondary opportunities that can eliminate some of that J curve that you get within private market investments, but also shortening a bit of that investment timeline as you think about getting capital back out. So we're seeing a lot of interesting investment opportunities. The only thing I'd add to that is, co-investment opportunities, which is a big area of our focus as well, given our history of single name underwriting.

We look at a lot of co-investment opportunities, both in conjunction with the funds we underwrite, as well as relationships that we have and partnerships that we have.

[00:12:18] Doug Heikkinen: From a portfolio construction perspective. How do you guide advisors into incorporating alts without overcomplicating things for their end clients?

[00:12:28] Rich Boghosian: Yeah, and it's a good question.

Education is such a big component of this market today and just understanding how alternative investments and private market investments work, first and foremost is key. They're going to be a little bit different. As you think about the factors of not just when capital gets invested, but how capital gets returned, the liquidity factors, return timing.

So there are a lot of things that should be considered for an end client's portfolio as you think about what is the right mix of alternatives within that. What does the liquidity need look like over time? And that's really going to come down to each individual or family that an advisor is representing of going through that portfolio and understanding what that appetite is. As we've talked about there, there's great return potential and opportunity to bring down overall risk and volatility in a portfolio, but it has to be done the right way and it has to be done with the right investments to have that be fully effective.

[00:13:26] Doug Heikkinen: What are some of the most common misconceptions you encounter and how do you help advisors overcome them?

[00:13:32] Rich Boghosian: Yeah, I think a big one is are difficult and pri private markets are difficult. They certainly can be. We try to solve for that. We have a technology platform that we utilize on the backend that solves for the majority of the administrative side. So that covers everything from marketing and presentation of opportunities to subscription docs, which is always a challenge.

Capital calls, distributions, reporting. Fully integrated with the majority of technology that advisors are using today. And tax documentation all done within one platform. So having that solved for us and solved for advisors and the end clients removes a lot of that friction that we see of just getting into an alternatives position in the first place, let alone managing it, let alone reporting on it.

And for us, it lets us be investors. Focus on that, not trying to solve for the administrative side. We never wanted administrative or technology to be a barrier for what we do or for what advisors and their clients are trying to do. And it lets us again focus on where we want to spend our time, on finding good quality investment opportunities.

[00:14:43] Doug Heikkinen: You've built PeakAlts with long-term relationships in mind. How do you foster trust and alignment of interests with your advisor partners?

[00:14:51] Rich Boghosian: Yeah, communication is key. We have what we like to call our dual selection process, where we have our partner network that's been developed through relationships we've had relationships we've developed, but, they're very much where we're on the same page with our clients. We know what they're looking for. We know what a long-term relationship looks like, and we want to be partners. We're partnering with people that we can see being with us for a long time. And similarly, we have our clients coming to us because they want to be with us for a long time.

We want to continue bringing them investment opportunities. We want to continue helping them with the existing opportunities that they do have. Whether that be from management to diligence to investment selection to structuring, we try to bring that all in-house. We're not trying to be everything to everyone in what we do.

We are very good at what we do and we maintain that focus. And getting that alignment and collaboration with our clients enables that. We both know what the other's expecting and it fosters a relationship that is highly productive, is beneficial for everyone and ultimately is about making good investments and driving return for investors.

[00:16:01] Doug Heikkinen: So what's next? What's next for PeakAlts and how are you positioning the firm to lead in this increasingly advisor focused landscape?

[00:16:09] Rich Boghosian: Yeah, we're going to continue on with what we are doing. We're again, not trying to solve every problem out there. We are going to maintain a more bespoke, customized, focused model that we are working with our clients to solve their problems of today, of tomorrow, and what those ultimately grow into. I think for us it's going to continue our focus on developing investment strategies, meeting managers, making investments, structuring the right investments. We're going to continue working with our clients to bring broader education and content to them as they think about developing their alternatives portfolio.

And, I think overall just continue to be a good partner for the folks that we're working with.

[00:16:59] Doug Heikkinen: All right. Last one for you, Rich. What advice would you give to advisors who want to take advantage of alternatives in a bigger part of their value proposition, but really don't know where to start?

[00:17:10] Rich Boghosian: Yeah, I think that's the key question of today.

I think having a good approach to alternatives in private markets is a point of differentiation right now. I think it's a necessity going forward. Everyone's going to have to figure out what they're going to do there. Advisors, I think as they're going out and thinking about their book of business, they're not just trying to grow organically and grow their client's books, but bring in net new assets and having a strong alternatives program and private markets program is going to be key in all that. I think it will bring in additional assets from existing clients, but also provide a good runway for bringing on new clients to their books. At the end of the day, it's really coming down to finding the right partners, finding the right investments, approaching those in the right way, understanding the products that are out there.

We talked a little bit about this broader democratization of alternatives and introduction of these semi-liquid products. And I think people are realizing that that's not necessarily solving for everything that they're looking for and not necessarily giving that liquidity solution that might be sought after.

So I think for advisors, building up that education, understanding where to focus, finding the right people to work with to tackle those opportunities are going to be key. Alts aren't going away. Private markets aren't going away. This is going to be a part of everyone's portfolio and that needs to be approached and the right and disciplined why.

[00:18:36] Doug Heikkinen: Rich. Really interesting stuff. Thank you so much for joining us. Where can people go to learn more?

[00:18:43] Rich Boghosian: Yeah, and thank you for having us, Doug. We really appreciate the opportunity. Our website, PeakAlts.com is the best resource and if you look us up, find us on LinkedIn. We're always happy to talk to new partners.

[00:18:55] Doug Heikkinen: Great. Thanks so much. We are on all social media platforms at Advisorpedia. Please give us a follow. For our producer Tory Miller and everybody at Advisorpedia, thank you for listening.