By Christine Giordano
It’s not every day that an investor has the opportunity to build an alternatives platform from scratch. Stephen Biggs, managing director and Head of Alternative Investments for the Mather Group, applied his investment acumen and experience to determine his firm’s strategies for new investments and due diligence to customize portfolios according to their varied risk tolerances and retirement goals.
Biggs started his career as a pension fund analyst in Montana, switched to private wealth management, and was chief investment officer and Principal at a smaller RIA when his company, HC Financial Advisors, was acquired in August 2022 by The
Mather Group. Prior to HC Financial Advisors, he was a Senior Analyst of
Zacks Investment Research, Senior Equity Analyst of Manning &
Napier, and Principal of Wells Capital Management. Stephen earned his MS in
Business and Finance and BS in Business and Management from San Diego State
University. He also holds the Chartered Financial
Analyst designation, Chartered Alternative Investment
Analyst designation, and is a Certified Financial Planner professional. Additionally, Biggs is Co-Chair of the Member
Programming Advisory Council of the CFA Society of San Francisco.
1. You have a fascinating amount of experience from different investment roles. You started your career as an analyst at a pension fund, transitioned from a
Chief Investment Officer role at a smaller RIA to building an alternatives platform from
scratch as managing director and Head of Alternative Investments at The Mather Group. What was the transition like for you?
My
initial exposure to alternative investments came from my time as an analyst
with a public pension for the state of Montana. When I transitioned to the
wealth management world in 2008, we were primarily focused on public market
investments. As the quality of alternative offerings improved in quality of
managers, lower fees and better structures for individual investors, we began
to add alternative investments to client portfolios in a measured pace
beginning around 2015.
There are a number of differences in objectives and
liquidity needs for individual clients compared to a pension fund. Much of my
role consists of training advisors that need to learn more about the
investments before evaluating the fit for their clients and working with
operations to streamline the subscription process for multiple accounts.
2. What were your first
priorities? What was imperative to put into place?
We
serve a wide range of clients in terms of asset levels and time horizons. Within
alternative investments we wanted to start with private markets, but needed to
start with vehicles that all clients could allocate to across the firm. We
started with semi-liquid registered fund structures that could be accessed by
all clients. In the case of accredited investors, this may be their only
exposure to private markets and for larger clients it may be their first
allocation while we build out an alternatives allocation and wait for capital
to be called into drawdown vehicles. Although risks unique to quarterly liquid
funds need to be taken into account, they can be a useful starting point.
3. How did you develop your due
diligence around your investments?
As
we scale into an alternatives platform we have been leveraging other parts of
the firm on due diligence efforts. The investment team has all worked on
investment due diligence and compliance has been leading the effort on
operational due diligence. IT has also helped with cyber security evaluations.
4. What are you finding are the
most attractive opportunities and why?
Most
of our clients have no current exposure to alternative investments and we
aren’t market timers, so we recommend starting with a balanced approach to
allocating across assets and strategies. That being said, private credit in the
current interest rate environment is generating a lot of interest from advisors
and clients. Although rates may fall, the premium over bonds and growing need
for private lenders to take the place of bank lending make credit an attractive
opportunity.
5. What gave you the impetus to
add alts to the platform?
We
feel alternative investments are a good supplement to our existing public
market exposure. Our focus has been on low cost and tax efficient public market
exposure. The addition of private market investments gives clients looking for
a little more return and better diversification and the ability to lock up
funds an attractive option.
6. What are your clients most
looking for as a fit for their portfolios? / What kind of structure is most
popular? (Semi liquid, drawdown or something else?)
We
use a variety of structures. Clients would probably prefer all semi-liquid
strategies so they can deploy capital faster and feel like they have more
liquidity. Although we have semi-liquid offerings that so far constitute the
majority of our exposure, it is important to recognize the shortcomings and
steer clients to drawdown funds when more appropriate for the underlying asset
or ability to access unique managers.
I think the industry will continue to
innovate on fund structure to find something that can better match liquidity
with the underlying assets but still have something that better fits the
uncertain nature of liabilities for individual investors. We would not put a
client needing quarterly liquidity into a semi-liquid strategy as we view these
as long-term investments, but this is a feature they are paying for as the
liquidity sleeve can add a cash drag or increased correlations with public
markets.
7. What does your training
process look like and what are some challenges that you’ve overcome?
Many
of our advisors are new to alternative investments, so training has been a key
to our rollout. We needed to be sure that advisors felt comfortable with our
alternative offerings, understood how to use them, and felt comfortable
speaking with clients. We hosted a series of webinars internally that gave
advisors the ability to learn and earn CFP CE credits that spanned from a broad
overview of alternatives all the way to fund specifics with the portfolio managers.
8. What’s your current focus
when it comes to selecting alts?
We
still have work to do educating our team on more complex strategies and are
moving at a measured pace. Our current focus is to build out offerings of closed-end
strategies for larger clients that can benefit from traditional structures and
access top managers. We are starting this initiative with a Fund of Funds on
the private equity side and plan to continue rolling offerings out across asset
classes.
9. What are you using for real
estate exposure?
Our
first offering for clients is a broadly diversified non-traded REIT. Over time
we plan to offer more focused strategies in a variety of wrappers to serve our
broad base of clients.
offerings apart?
We
plan to leverage our size to aggregate assets and access more institutionally
focused GPs than smaller wealth managers. For our first offering we have
partnered with a private equity firm to offer a Fund of Funds exclusively for
our clients that includes a number of hard to access GPs.
How can your organization
become a catalyst for another firm’s growth?
TMG
continues to grow, and we are always looking for partners that would be a good
strategic fit from an investment and geographic perspective.
in the process of rolling out?
We
are rolling out a private equity/venture fund of funds exclusively for our clients. We feel this offers access to a
diversified group of quality managers that differentiates us from other wealth
management firms.
What investments do you hope
to incorporate within the next two to five years? And what do you see yourself
outsourcing to make it happen?
We
plan to expand our drawdown fund options as assets on the platform grow. We
would also like to add multi manager solutions in other asset classes, such as
credit and real assets, to help clients get diversified access in a single
vehicle and consolidated tax reporting.
Whom are you seeking to hire
or join forces with?
As we scale our platform we will increase due diligence
resources. It is too early to tell how much of this we want to manage
internally versus using an external partner to help with the effort.