By Aaron Filbeck, CAIA, CFA, CFP®, CIPM, FDP, Managing Director, Head of UniFi by CAIA™.
In this blog post, I unpack Crossing the Threshold: Mapping a Journey Towards Alternative Investments in Wealth Management with contributor Sylvia Kwan, PhD, CAIA, CFA, chief investment officer of Ellevest. Before reading the rest of this blog, you can get up to speed with the full report or by viewing our chat within this video.
Sylvia continued our metaphorical journey by highlighting what’s most important when considering implementing alternative investments—the client’s objectives. Throughout her contribution to the report, she charts a path forward with some tangible examples of how alternatives may be used in the context of a goals-based framework.
Rising to the Challenge
At some point in an adventure story, the hero enters the “innermost cave” of the adventure, where they must overcome a significant challenge, obstacle, or antagonist, and then re-emerge. Typically, this stage in an adventure story provide the audience with deeper insight into who the character is, what drives them, and importantly what frightens them. In other words, we finally get a glimpse at the “core being”.
In my conversation with Sylvia, we go deeper into the core being of how alternatives may or may not be used to achieve clients’ goals and objectives. At the end of the day, alternatives are simply tools at our disposal, and we talked a bit more about how firms can better align these tools with their purpose in client portfolios. This should not only lead to better outcomes but also allow us to make alternatives “less scary” or complex, as is often the case for advisors and clients alike. As shown in Figure 1, Sylvia highlights that alternatives and goals are along a spectrum of risk and return.
Figure 1: Examples of Goals and Alternative Investments
Source: Crossing the Threshold. CAIA Association. June 2024.
A Better Way Forward
Beyond discussing a goals-based framework, one of my biggest takeaways with Sylvia was the journey itself. Unlike many RIAs that may have a long track record of long-only investments, or even dabbling into liquid alternatives, Sylvia and the Ellevest team started with private markets in mind as an important differentiator for clients.
With that, the journey to build up allocations still required a lot of sweat equity, time, patience, and networking. Sylvia and team have an additional focus on impact investing, so you can imagine the quickly shrinking universe when you layer small RIA + private markets + impact. A truly compelling conversation! No matter where you are on the adoption curve, it’s worth the time to listen in.
About the Author:
Aaron Filbeck, CAIA, CFA, CFP®, CIPM, FDP oversees UniFi by CAIA™, a learning platform dedicated to educating the private wealth management industry on alternative investments. He was previously responsible for leading and implementing CAIA Association's content agenda, thought leadership initiatives, and content development for the CAIA Charter Program.
Aaron is a frequent speaker and writer on various topics of alternative investments and his work has been published in CAIA’s educational programs, numerous academic journals, books, and industry publications. Aaron’s industry experience lies in private wealth management, where he oversaw asset allocation, portfolio construction, and manager research efforts for high-net-worth individuals and institutional retirement plans.
He earned a B.S. with distinction in Finance and a Master of Finance from Penn State University. He holds the Chartered Alternative Investment Analyst (CAIA), Chartered Financial Analyst (CFA), Certificate in Investment Performance Measurement (CIPM), and Financial Data Professional (FDP) designations, and is a CERTIFIED FINANCIAL PLANNER™. He is a Past President of CFA Society Columbus and serves as a board director and Programs Chair for CFA Society Philadelphia. Aaron is an adjunct professor and serves on multiple advisory boards for Penn State University.