When it comes to alternative investments, many advisors – and their clients – instinctively think the asset class is mostly comprised of commodities, long/short strategies and real estate, among others.
Often prized for reducing correlations to equities and fixed income instruments, alternatives are also can also be income generators and inflation fighters. However, for all the utility offered by alternatives, it's an asset class in dire need of refreshing. SC Distributors provides that.
The California-based firm raised $5 billion for an array of alternative investments, including cell towers, data center and healthcare real estate, impact investing strategies, middle market debt and renewable energy. SC Distributors “goal is to provide financial advisors and their clients access to innovative investment structures and asset classes.”
With approximately 100,000 investors, SC is proving there's robust appetite for a new breed of alternative investments. That figure also says the firm is making asset classes previously reserved for the few available to a broader swath of investors – an appealing proposition for advisors and clients alike.
Delivering on What Investors Want
Traditionally, many alternative strategies carry high fees, which is good for a distributor but not so much for clients. Even with the evolution of low-cost index funds, some alternative investments remains pricey, but SC's strategies are compelling and about much more than commissions for advisors.
“I see SC Distributors as a company that understands what investors are looking for in an alternative investment. It's not enough to simply offer a "non-correlated asset". They want quality assets in dynamic sectors, durable income, and a realistic chance at meaningful capital appreciation. Investors are more demanding today, empowered with more information and education than ever before, and SC is rising to meet the challenge,” says Douglas Blake, managing director – investment services at Kingswood U.S.
To Blake's point about being dynamic, consider SC's real estate offerings. Cell tower and data center REITs are among the more futuristic corners of the real estate sector, but many traditional benchmarks in this space lack adequate exposure to those groups. For example, the widely followed MSCI US Investable Market Real Estate 25/50 Index has heavy exposure to hotel, office and retail REITs – the very corners of the sector that were punished by the coronavirus pandemic.
That's not the only relevant point regarding SC's real estate portfolio. The global 5G rollout is a multi-year process that's increasing demand for cell towers. The ongoing demand for cloud computing and cybersecurity products – two markets nowhere close to maturity – increases the need for data centers while aging populations bolster the investment thesis for healthcare REITs.
Above and Beyond
The SC Distributors model is increasingly relevant at a time when more clients want their investment dollars to do some good, whether it be by impact investing or renewable energy. Those concepts are readily accessible in basic form – either by individual stocks or funds – but SC offerings go further.
It's not everyday clients can access wind farms in Montana or farmers in South Africa, but SC offers that on a direct level not found in traditional investment mousetraps.
Bottom line: The next generation of alternatives is here and clients want access. Advisors just need to know where to look.
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