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Partner perspectives

Welcome to Partner perspectives with Madeleine Sinclair, Head of North America Distribution at Blue Owl. This series features conversations with top financial advisors, highlighting how alternatives have helped improve outcomes for their clients’ portfolios and offering advice for advisors who may be interested in taking their first steps into the private markets.

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Madeleine Sinclair

Managing Director, Head of Private Wealth Distribution, North America

Introduction

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Sitting down with Eric Gerster

Introducing a new set of ideas for client portfolios

In this installment, Madeleine sat down with Eric Gerster, CFA®, Chief Investment Strategist at AlphaCore Wealth Advisory. Eric is a strong believer in the power of alternatives, and they have been a consistent theme throughout his career dating back to his time as an institutional portfolio manager. Hear Eric’s perspective on the evolution of the alternative investments space, the importance of partnership in manager selection, and how he thinks about portfolio allocation for private wealth clients.  

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MS: Hello, I'm Madeline Sinclair, Head of Distribution for Blue Owl Capital and this is Partner Perspectives. I'm sitting down with Eric Gerster to talk about how he's utilizing alternatives in his practice. Eric, we'd love to learn more about your firm, how you started it and your role there as the chief investment officer. 

EG: I got into the business really almost by accident. So, I had been an institutional portfolio manager for about 20 plus years of my career. When I left that business, I had been managing my own capital and I had some friends and executives, that I used to invest in their company, come to me and say, “Oh, can, can you take a look at my portfolio for me now that you're not running a hedge fund anymore?” 

They liked the fact that I brought a background and an expertise that was not just plain old stocks and bonds. I was a hedge fund manager. I understood alternatives. I had invested in real estate. And I just loved working with the individuals when I started working with them. The ability to help them allocate their assets in a way that really made a difference in their life, brought them financial security, and helped them meet their goals was just something so personally satisfying. 

MS: So, you've been in the hedge fund space. If you look at the arc of where private markets are today for clients, how do you see it as providing income and diversification for your clients? 

EG: Well, it's incredible how it's changed, right? The democratization of alternatives that have happened over the last decade plus has brought an entirely new set of ideas for clients. 

You can really get away from just 60/40 portfolios and you can have, as we say, sort of three legs to the stool. The third leg is these alternative asset classes or private market asset classes that didn't exist before. It helps clients get more diversified portfolios, with noncorrelated assets, so they don't do the same thing as stocks and bonds. And those assets lower volatility, lower risk and enhance returns.  

The way we think about it is, if clients lose less when the market goes down, they stay invested longer and they do better over the long term. 

MS: So, there are other advisors out there who are trying to make the decision? What would be your guidance for advisors to navigate this space and get started? 

EG: When you invest, you want to pick the partner that has experience, that has great client service because inevitably, when you go outside of just stocks and bonds, sometimes there'll be subscription documents, there might be K-1s. There's going to be questions that are going to come up. You want to know that when you call that you can get someone to answer, or when you send an email that they're going to help you, that they're going to work with you with your clients because no matter what your experience level is, they understand and know the product better than you do. You want to be able to work with them to help you explain that to your client.  

So obviously, we have a strong partnership with you all at Blue Owl. We enjoy working with you and the reason is for many of the reasons I just highlighted. We know we're going to get great client service. We know there's a great product breadth there, and we know you've been doing it for a long time. I think that's important because these products can scare clients sometimes because it's not something that they see every day and that they know about. You have to be able to articulate it in a way that they can understand it and understand how that fits into their needs and goals. The partner you pick is critical to that.  

MS: So, we see institutions allocating right now, 25 to 30% towards private markets. What do you see for the private wealth space? 

EG: Look, I think we're probably on the high side because we really believe so strongly in alternatives that for our clients it's anywhere from 20 to 50% of their portfolio is going to be in alternatives. I would say, and you would know this better than I would, But the average RIA is probably somewhere between zero and 10%. I think that number is going to go up over time because clients are going to demand it. 

MS: So, you have such a range of offerings, it sounds like, with your firm. If you think about it in the context of one client's portfolio, what are your preferred asset classes? How are you talking to them in terms of portfolio construct? 

EG: In real estate, I'm a huge fan of triple net lease. I love the 15-to-25-year leases. I love the income component of it compared to other real estate asset classes right now. It's really investment grade credit at a higher yield and I own the real estate. I mean that just, right away, I was like okay I get this, and this is great. I mean, in certain states, it's better than owning munis, right, because of the tax advantages. 

MS: So, my final question for you, Eric, is for advisers that are just reluctant to start allocating to private markets for their clients, where would you tell them to start? 

EG: You know, I think it's about picking the right partner and making sure that they can help supplement what you're doing with your clients. 
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