Partner perspectives

MS: I'm Madeleine Sinclair, Head of Private Wealth North America for Blue Owl Capital, and you're with Partner Perspectives. I'm joined today by Scott Welch of Certuity to talk about alternative investing. Scott, welcome.

SW: Thank you, thank you for including me. It's nice to be here.

MS: We should start off first with—how did you become a CIO?

SW: OK, well, that's a long story. I've been in a Chief Investment Officer role for most of the past 20 years at a couple different firms. Before Certuity, most recently, I was the CIO of Model Portfolios at WisdomTree Asset Management, which is an ETF sponsor.

MS: Very familiar with WisdomTree—I actually spent many years at iShares. So we know that Certuity provides a range of services to your clients, different solutions to fit their needs. Curious—how have alternative investments served?

SW: Our client base tends to be either high-net-worth individuals or ultra-high-net-worth families. The alternative and private market space is something they’re very active in. Part of our value proposition—in addition to what we do on the family office side—on the investment side a big part of what we do is try to find differentiated private market and alternative solutions on behalf of our families.

MS: When you have clients that have very little experience with alternative investment allocations, where do you start?

SW: We start with what we believe are the potential benefits of private markets. That includes liquidity and leverage premiums that you can generate in those markets. It might make sense to allocate—not over-allocate—but maybe 15 to 20% of a portfolio to things outside the public markets, both for return and diversification purposes.

MS: There are many managers who’ve been in this space for decades, and quite a few new entrants into the space and asset class. How does your evaluation process differ between traditional asset managers and focused alts managers?

SW: That’s a good question. One thing I believe is that, unlike public markets, in private markets the top quartile managers tend to stay top quartile year after year. That’s not necessarily true in public markets. So, if you’re going to get a median-level return in a private investment, you might as well not be there. You need to find the best managers.

MS: You’ve been at this quite some time—

SW: Longer than I’d like to admit.

MS: So that means it’s been an evolution. What would you say is one of the most impactful elements of alternative investments for investors today?

SW: To me, it’s very clear—it’s the democratization of the space. When I first got into the business, these strategies were only available to qualified purchasers—very wealthy individuals, institutions, sovereign funds. Then along came evergreens—Evergreen facilities made it accessible to accredited investors who aren’t necessarily qualified purchasers. That’s a big difference, and it dramatically broadened the opportunity set.

MS: And for other advisors or CIOs just beginning their journey with alternative investments—what advice do you have?

SW: How much time do you have? First thing—don’t toy with it. If you’re going to be in this space, you need to commit. For us, that means about 15 to 20% of a typical client portfolio in a combination of alternative and private investments.

MS: And I think that goes back to your point—tactical versus strategic allocation. 15%—surely. All right, well thank you so much for your time.

SW: Of course.