Investing / The Compound Effect
Altruist made alternatives one click away. The hard part has not changed.
| 6 min | By Heath J. Harris
One of our custodians just opened the gate to Blackstone, KKR, and JP Morgan strategies. The interface is beautiful. Picking the right ones is still the only part that matters.
Altruist made alternatives one click away. The hard part has not changed.
On June 2, Altruist, one of our two main custodians, launched a private markets platform inside the standard advisor portal. Blackstone, J.P. Morgan Asset Management, KKR, and Pantheon are on the menu at open. No custody fees on partner funds. Document prep, e-signature, reporting, and billing all stay inside the platform. The alternative holdings flow into the same client portfolio view as the ETFs and direct-indexing accounts. It is the cleanest implementation of private markets we have seen at the RIA level.
We have argued for years that real diversification means access to every asset class that earns a different kind of risk premium. Private equity, private credit, private real estate, and infrastructure all behave differently than public stocks and bonds across a cycle. So at a structural level, this is a good thing. More households should have the option. More advisors should have the tools to use it well.
That is the easy part. The interface.
The hard part has not changed.
The 1990s and 2000s gave us this exact problem in mutual fund packaging
If you were investing in the mid-1990s, you remember the great mutual fund chase. The Morningstar star rating system was new. Every newspaper ran the quarterly winner list. Funds advertised five-year returns at the top of every magazine. Investors picked funds the same way they picked restaurants. Brand they had heard of, recent reviews, a face on the marketing material.
What did people actually buy. The Janus Twenty after it ran 65 percent in 1998. The Fidelity Magellan when Peter Lynch was the name on the door, then again when he was not. Dot-com sector funds in 1999 right before the index they tracked fell 75 percent. The chase looked sophisticated. It was a behavior dressed up as analysis.
The pattern played out in three steps every time. The strategy with the best recent return raised the most assets. The marketing said it was about the manager. The fund got too big to run the strategy that produced the returns. The next three years disappointed. Investors blamed the manager and bought the next hot fund.
We are about to watch a very polished version of that movie inside the alternatives wrapper. The new menu inside Altruist is great. Blackstone, KKR, J.P. Morgan, and Pantheon are real institutions with real track records. None of that makes the selection problem any easier for the family choosing between three private credit sleeves with similar names and very different exposures.
Picking the right fund matters more inside alternatives than it does inside public markets, because the dispersion of returns between top-quartile and bottom-quartile managers is two to four times wider in private equity than it is in large-cap equity. That is not us, that is decades of Cambridge Associates data. The wrong manager in alternatives is a much bigger mistake than the wrong large-cap manager.
The supplement aisle is the better metaphor than you would think
Walk into any health food store and you will see the same thing we see when we open a new client's portfolio. A counter of bottles. Vitamins, adaptogens, mushroom powders, peptides, methylated B-complex, NAD precursors. The shelves are heavier and shinier every year. The supplement category in the US passed 60 billion dollars in 2024 and is still growing at double-digit rates.
Ask the person buying the bottles a simple question. What does breakfast usually look like. What kind of oil is in the pan. Are they reading the label on the bread. Did they sleep more than six hours last night. The answers are almost always the same. They have not fixed the diet. They are reaching for the supplement.
Until the foundation is clean, the supplements do not work. Worse, they sometimes paper over the symptom of a problem you should be solving at the diet level. Drop industrial seed oils. Drop the preservatives. Pay attention to bread that is engineered for shelf life instead of nutrition. Sleep. Walk. Then, with the foundation in place, a few well-chosen supplements actually do their job.
Same with portfolios. Until your asset allocation is appropriate for your stage, your tax location is using the accounts the way they were designed, your withdrawal sequence makes sense for the next ten to fifteen years, and you have a behavioral plan for what you do in the next 20 percent drawdown, alternatives are a supplement on top of a broken diet.
We see new client portfolios every month where someone added a private REIT or a non-traded BDC five years ago because their old advisor liked the yield, and they have no idea what the lockup looks like, what the gate provisions are, or what the actual underlying credit quality is. The wrapper looked appealing. The foundation underneath it was not in order.
What we think is actually the right read
We believe in alternatives, in the right place in the portfolio, for the right family, at the right time in their planning life. We think the Altruist launch is a meaningful step in making them accessible. We will be using the platform for clients where it makes sense.
We will also be careful about three things, in order.
First, the foundation. Allocation, tax location, withdrawal plan, behavioral plan. If those four are not solved, an allocation to alternatives is rearranging deck chairs.
Second, the manager. A platform that adds Blackstone and KKR is doing 80 percent of the screening for you. It is not doing the last 20 percent, which is matching the specific fund strategy and vintage to the specific family's liquidity needs, tax situation, and time horizon. That is the work.
Third, the size. Five percent of a balanced portfolio in private markets is meaningful. Twenty-five percent in private credit for a family that needs the money in three years is dangerous. The position size has to match the liquidity profile.
The Department of Labor is right now processing more than 40,000 comment letters on whether private assets should be permitted as a default option inside 401(k) plans. The trade publications will treat every step of that rulemaking like a referendum on alternatives. The right answer is the same now as it has been for thirty years. Foundation first. Then the supplement.
If you want help running this for your own plan, our team at Compound Advisory does this work every week. You can schedule a complimentary assessment at compoundadvisory.co/free-assessment.