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Investing in Alternatives with iPartners
29 Plays3 years ago
AFI interviews Travis Miller, the Managing Director & Co-Founder of iPartners, a leading alternative asset investment platform that provides wholesale investors direct access to a diversified range of institutional grade alternative assets across property, private equity, private debt and venture capital. For more information on iPartners please go to: https://ipartners.iplatforms.com.au/about AFI PROMOTION: For the month of November, iPartners has reduced the minimum investment amount to $5,000 for new wholesale investors, who register using the AFI referrer code, who would like to invest in either iPartners Core Income Fund or iPartners Investment Fund. To access this opportunity please ensure you include "AFI" under Referrer when you register. The Alpha Females Invest is a financial podcast for those who want to elevate their investing knowledge. We host a series of experts to navigate a technical deep dive into their field of expertise. We aim to promote gender diversity by having at least an equal representation of female guests on our show. Thank you for listening and supporting The Alpha Females Invest. Disclaimer: The views expressed in this podcast are those of the speaker. The content is not financial advice. You should seek the assistance of a professional who can take your personal circumstances into account prior to making any investment decision. The awesome tunes are courtesy of @tmykmusic
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Transcript
Introduction & Disclaimer
00:00:03
Speaker
Welcome back to the Alpha Females Invest podcast. Two females working in the finance industry searching for alpha. My name's Emily. And my name is Clooney. And together we bring diversified perspectives from the buy and sell side of the finance world.
00:00:17
Speaker
As usual, any information discussed in this podcast is not financial advice. All opinions reflect those of the individuals and this podcast is for educational purposes only. You should always read the PDS and talk to a financial advisor who can consider your personal circumstances before you invest.
Meet Travis Miller
00:00:35
Speaker
Today on our show, we're hosting the CEO and co-founder of another really interesting and innovative business, Travis Miller from iPartners. Prior to iPartners, he has worked in financial markets for the last 20 years and most recently as a managing director at UBS, but he was also previously a director at Deutsche Bank and ANZ. He has been a pioneer in the evolution of alternative investments and product in Australia and is also a successful investor in his own right.
00:01:01
Speaker
completing various property developments and investing across both public and private markets. In addition to all of that, I think it's such a great time to have you on the show, Travis, as I know our partners has recently been in the press a fair bit, all for positive reasons, and we can definitely get into that a little bit later. But for now, welcome to the show. Thanks for having me. Appreciate you making time.
00:01:23
Speaker
Absolutely, Travis, and it's great to have you on, as Em sort of just mentioned. Now, we didn't tell you this, but we do like to start every episode with the same question. So today, could you share with us one of your most embarrassing career moments? Yeah, no worries. I guess the first observation I'd make is nothing is embarrassing in the long run. So, you know, time heals all wounds. But just to give a simple example, I grew up in a small country town, you know, pre-sushi train.
00:01:52
Speaker
and then I got a job at investment bank as a graduate and I was taken to a Japanese restaurant and expected to eat raw fish with sticks and I had no idea how to use chopsticks and they were eating sushi so it ended up a total cluster but in hindsight as I started with you know there's no great reason to be embarrassed you know I had a couple of great bosses and they they laughed it off as did I but I guess at the time it felt it felt important
00:02:18
Speaker
Are you a big sushi fan still to this day or have you really steered clear of the chopsticks usage? No, I've grown up. I can use chopsticks. I like sushi. I like to think I'm a bit more cultured now.
The Birth of iPartners
00:02:30
Speaker
It was a good lesson learnt. Definitely. And sushi is not the only thing that you love. It seems like the best ideas are often created over a casual drink. So can you please tell us how you came up with Eye Partners and what you guys actually do?
00:02:45
Speaker
Yeah, so there's been plenty of drinks and celebrations along the way, but we don't really come up with the business with that. It was literally myself and Rob and Camille as the co-founder. We just simply thought there must be a better way to access alternative assets for the normal investor. And we think of ourselves as the normal investor. We're not a large institution. We're not a large family office. We just think we're normal wholesale investors. So we went out and built a tech platform to make investing easy.
00:03:14
Speaker
We think using our platform, we've actually made it easier to invest in alternatives than to actually invest in equities using tech. I guess the second part of the question of what we do, we primarily represent our investors. It's hard for investors to be experts on everything. We see ourselves as representing them when we go out to source assets. Primarily, it's about the investor. The second piece, we spend a lot of time just finding good investments.
00:03:41
Speaker
because if you're not finding good risk-adjusted returns or interesting assets for investors, then you're not really much used to them, to be honest. What we do, how we make this work, is that we give investors choice because we allow them to invest in relatively small increments. As long as they're a wholesale investor, they can invest a minimum of $10,000. What we do by the technology, we'll aggregate lots of small investors to create one big investor.
00:04:09
Speaker
And when that one big investor comes along, that's when sort of the fun starts, you have a bit of power at the negotiating table. And when we go to capital raises, who are looking for capital, we can go then with a large, large investments, which allows us to get a little bit more power for our investors. The other thing I'd mention is that we focus a lot on building trust and educating investors. Cause the way we see it is education is the ticket to the alternative dance in a way in that
00:04:37
Speaker
unless you can understand the product you're investing in, then you're highly probable not going to invest, right? Unless you trust the party you're working with, then you're highly unlikely to invest with them. So we spend a lot of time on that basic education side of things. We've still got a heap of work to do, but podcasts like this is part of what we get up to. We do a lot of research articles. We set up lots of educational pieces. We do roundtables. We just think that
00:05:04
Speaker
The alternative asset space will only grow when education gets out to a broader audience. Might have been a long answer to your question, but I think I got across my general thoughts on the process.
00:05:16
Speaker
Yeah, I think that's really interesting and great to hear you are promoting, I guess, education in the alternative space. Going into that in a little more detail, I'm really interested, Travis, what are the specific types of products and funds that you guys have on offer?
iPartners' Growth and Offerings
00:05:33
Speaker
And you mentioned investors coming in and once you get a big enough investor, then you've got a bit more bargaining power at the table. So can I ask where thumb is at the moment and does that move around a fair bit?
00:05:43
Speaker
Given the nature of our business, it just continues to grow and it's growing at a rate of knots at the moment. I was mentioning the AFR a few weeks back that we cracked a billion dollars of firm. By mid next month, I'd say we're probably at 1.25 billion. It's growing really quickly. It's very diverse, the assets we look at. When I look at
00:06:05
Speaker
Alternatives, it's such a broad universe, but I think about private credits. It just thinks loans secured over an SME business or a company. Property debt, loans secured over a property asset. Asset-backed debt, loans secured by a pool of assets. Unlisted equity, venture capital, private equity, global infrastructure, anything outside of the traditional box. When I'm talking to people about alternatives, I say it's best to think about what it's not. It's not buying and selling bonds. It's not buying and selling equities. It's not cash.
00:06:35
Speaker
but it's pretty much most of the other stuff, you know, he's an alternative and that's where we like to play. Cause there's lots of people who do traditional assets really well and they'll continue to do so. We'll play where we think we're good and we've got the right skillset.
00:06:48
Speaker
Yeah, that's great. Thanks for covering that. And I guess when I think about alternatives and thinking they're usually quite long duration and potentially illiquid, can you maybe give our listeners an idea of what is the typical timeframe for an investment? Is it that longer duration or do you target a bit more of a shorter investment horizon? Yeah. So yeah, you're spot on. That can be longer duration, but
00:07:11
Speaker
Our assets have been around a 12 to 80 month average maturity. And the reason for that, the most interesting alternative asset has been private credit for the last two, two and a half years, because it's had nice relative value. And given how low interest rates have been, it's been a pretty interesting space to invest.
00:07:30
Speaker
My personal view is that our average maturity will probably drift out a little bit because we're starting to see a lot more opportunities as private credit gets a little bit crowded, and in particular, property-based private credit. A lot of opportunities popping up in pre-IPO, private equity-like exposures. As you step into more growth-based assets, you just naturally look to longer duration assets. I can see it drifting out. Private credit is still interesting, but our goal is to give investors access
00:08:00
Speaker
to a diversified pool of alternative assets, which I think means a little bit of growth, a little bit of yield-based assets, and then just other quirky assets as well that fit in the alternative box.
00:08:12
Speaker
Travis, we have spoken to a few different investors and in previous episodes on our show, we have focused on active versus passive investing, small cap versus large cap, and how both of those aspects can help to diversify a portfolio. Alternative assets, I guess in my opinion, is the next layer to this. Can you tell us why holding alternative supports a diversified portfolio and the key benefits of that from your opinion?
00:08:40
Speaker
Yeah. I mean, the key of it, you're just literally paying in a different pond. So when I was using the example before, what alternatives aren't, you know, not buying a selling equity, buying selling bonds or cash. So we're looking at the other part, right? So you're playing literally a different field and asset prices move to a different beat, right? So they're not, they're not perfectly correlated and they'll tend to behave in a different manner. And so you're ultimately getting paid for taking different types of risk.
00:09:05
Speaker
To give you an example, a lot of people talk about alternative assets are less liquid, and that typically does tend to be the case. By being less liquid, you can actually generate any liquidity premium and get paid a certain return for taking on that risk that may not exist in actively traded listed equities.
Advantages of Alternative Investments
00:09:25
Speaker
The other thing about the segment, there's often a scarcity of capital playing in this part of the market.
00:09:30
Speaker
Whenever there's a scarcity of capital, if you're providing capital to that segment, you tend to have a better buying power and then you can negotiate a little bit harder with people looking for capital because they have less sources of that capital. I think a lot of those factors is
00:09:45
Speaker
You've got the pricing power created by scarcity. You're looking at different asset classes with different correlations, traditional. And you can often push the risk return in your favor while you've got a lot more control in alternative assets. You can drive the documentation. You can drive the maturity. You can drive the exits. So all those things lead to, just by inference, a more diverse portfolio.
00:10:09
Speaker
That's great. I guess you've really set the scene for why someone should consider alternative investments in their portfolio. I think that diversity and uncorrelation makes complete sense to hold as part of a portfolio. You mentioned that you're about a billion dollars in funds under management now.
00:10:26
Speaker
So, how have you had the impact of getting people to trust you with their money? And particularly as eye partners is a relatively new business, how have you gotten your investors to feel comfortable with putting their money with you? And you mentioned their wholesale investors and the minimum is typically lower than a standard alternatives portfolio. But at the same time, you mentioned even at the start that the trust factor, how do you build that with your investors?
00:10:51
Speaker
Yeah. I mean, the one thing we like to say in the SME, we think we've moved to the M-size business. We've moved from being a small business kind of to the M part of SME. But when it originally started, it was literally about the experience of the team. But within our team, we've got a number of XMDs out of UBS, Goldlins, Deutsches, CVA, Westpac, ANZ. So it started with, you know, we were a strong team with good experience.
00:11:16
Speaker
The reason we've accelerated the last probably eight months is I think we've done what we told people we're going to do. So we went out and got interesting investments. You know, we created a line of interest for co-investing personally in quite a lot of assets. And we actually got a lot of maturity is coming through. So we're giving money back to investors. We've paid the distributions on time.
00:11:36
Speaker
They're just starting to see that track record coming through. I think that's where you get the trust piece of it because you just do what you say you're going to do and then it's all in the outcome. We are focusing on education. We're not trying to hide anything. It's literally, this is the product. We're very transparent. This is the information you need to understand. I think it just builds on itself. The longer you're in business, I think that feeds from there.
00:12:02
Speaker
And it helps that we've got over a billion now, we've done over 180 funds. So now that track record
Future Plans and Governance
00:12:08
Speaker
is there and there's evidence that people can point to. That track record is clearly very impressive, Travis. And as you mentioned, you've clearly got a strong team there behind you. We've also, as we touched on at the beginning, seen some really exciting press around our partners regarding a capital raise, potential IPO and the appointment of your new chair.
00:12:29
Speaker
Bob Mansfield, who is the ex-chair of Telstra. What can you tell us about the corporate side of the business and how you found the process of raising capital? And what are you using that capital for? What made you consider doing that? And if we can also maybe ask why are you considering your ASX listing as well?
00:12:49
Speaker
Yeah, so the capital is all about as you grow a certain size, you've got to really focus on the governance side of your business. So that's like getting independent directors in getting independent chairs in building out your compliance team, your legal team. So there's a whole pile of staff hiring that was required to match the growth.
00:13:08
Speaker
And then you're also on your product team, you get a lot of product turning up and you've just got to filter through the pipeline of what's good, what's bad, what's worth taking to investment committee. So it's really about resourcing.
00:13:20
Speaker
a business properly for growth because you've got to size yourself right now in a way where you want to be in 6 to 12 months. Otherwise, you don't actually get to where you want to be in 6 to 12 months. You've got to spend now. It was really for growth capital. The business is now profitable because of that investment we've made and that profitability looks like it will continue to grow. I think it's been a good investment. It was the right time. We've actually got quite a good number of investors on board that can help the business too, which is important.
00:13:49
Speaker
That's great. Thanks for sharing that. And then obviously a funds management business doesn't have much without returns. So I'm curious to understand a bit about what type of return that you're seeking and how that varies between the different funds and the specific investment vehicle. But then also whether you're yield focused or total return and whether there's a benchmark or hurdle return that you're kind of targeting. Yeah, that's a good question. So the return I seek, I seek a better than fair return.
00:14:18
Speaker
I look at an asset and I go, that asset, the return looks like this. I want a better return than that. I'm not going out there and saying I've got a hurdle of 5%, 10%, 15%. I'll analyze things on an asset by asset basis because we look across the whole alternative asset spectrum. There's no benchmark.
00:14:36
Speaker
It's just all about getting a nice risk-adjusted return. But we look across yield, we look at growth, we look at combination. I mentioned earlier that the private credit spectrum has been really interesting for a couple of years and will continue to be so for a little while. But I think the opportunity is starting to pop up more in that pre-IPL equity space, so that'll be more growth-focused.
00:14:58
Speaker
So there's no real number that you look for. But talking about performance, like our yield assets have been in that 8% to 10% type return. We've got a flagship fund that's been annualizing at 9.7% across the last two years. Our growth assets are normally clearly double digit. So there's a nice track record of performance, but it's never about a specific target. It's just that asset, that risk profile.
00:15:25
Speaker
What is the fair return and how can I adjust it in my favor, which could be by legal documentation, terms of the transaction or negotiating a little bit harder on behalf of investors to get a better price. In a unique space alternative asset, nothing's written on the box. It's all about working for the best outcome for a given asset.
00:15:45
Speaker
I think you touched on a really critical point there in that you assess each asset individually, which in alternatives, obviously they're alternatives for a reason, and so every asset is clearly pretty differentiated. Generally speaking, alternative assets, I guess one of the key pushbacks have been that they are only accessible by the very wealthy.
00:16:06
Speaker
I'd love to understand who can access your product. You mentioned it's normally wholesale investors. Could you just break down the definition of a wholesale investor for our listeners and likely what are the minimum amounts associated with that? Yeah. And so this point here is a big reason why our business exists because it was all about giving the normal wholesale investor access to an asset class that they previously wouldn't get access to. So for us,
00:16:33
Speaker
the minimum investment amount as long as your wholesale is $10,000. The reason we keep it that low is it allows investors to build out a diversified portfolio of direct alternative assets so they can average into an asset class in the investment increment that's appropriate for their personal wealth.
00:16:53
Speaker
The definition of a wholesale investor, and it potentially will change over time, is a minimum of $250,000 per year across the last two years, or net assets of $2.5M. There's a few other tests for criteria, but they're the primary ones that most would consider. That's why it's that access point we provide is a key part of why our business exists.
Regulatory Impacts
00:17:17
Speaker
Just touching on that again, I've heard press speculating and the government speculating that potentially they're going to increase the thresholds to be considered a wholesale investor. Would that have a few implications for your business in terms of if currently a wholesale investor is deemed to have net assets of 2.5 million and that increase to five? Would you say that as being a bit of a hindrance to eye partners or would you lower than the definition of who can invest?
00:17:45
Speaker
I mean, I've found with regulation and things over the years, the regulation comes into play and you just deal with it at the time. I mean, it may be that a few investors can no longer invest and they don't meet the criteria that may happen. But, you know, the type of investors investing in this type of product tend to be, you know, relatively high net worth. But if that was to occur, we'd just deal with it at the time, I think.
00:18:09
Speaker
And just fitting our partners into the broader landscape, are you saying that there's any direct competitors to your business? And I guess then what would you say is your competitive advantage? Yeah. So, I mean, there's always competition in different forms. You know, you've got offline competitors, domestic and offshore.
00:18:30
Speaker
There's not a heap of competitors at the moment in our sort of one-stop shop kind of model where an investor can directly access alternatives in increments that suit their wealth, but that'll always change over time. But I think the differentiation is we've got a very unique platform. It's a bit like in the early days, what you had for listed equities, those types of platforms, we've built something like that for alternative assets, which is a really nice investor experience. We've got really unique product.
00:18:58
Speaker
I don't know if there's many platforms, if any, where you could invest in the type of assets we originate, given the skill set of the team.
Competitive Edge of iPartners
00:19:06
Speaker
The team expertise, I think, is a huge differentiator. That's how you build the trust. Most of the people involved in business are well-known across the market with good CVs. I mentioned the tech, definitely investor experience. The other piece is we tend to really try and get a line of interest with our investors.
00:19:25
Speaker
Most of the staff within our business are actually personally investing in a lot of the funds, a lot of the typical assets that we put on. I think it would be rare not to have a staff member in those assets, and we're going in parry pursuit alongside other investors, exactly the same terms, exactly the same price. I think that creates quite a nice alignment of interest with our investors.
00:19:48
Speaker
Yeah, absolutely. And I think investors love to see that you're co-investing, particularly not being favorable treatment on fees as well. So that's great to hear. And I have visited your website and seen your platform, and I can say it is very user friendly. One of the projects I noticed on there, which I think has expired now, but it was the Koala Project, which was a super interesting one. Are there any other, I guess, projects that you want to call out that have kind of, you know, had a lot of attention from your investors?
00:20:16
Speaker
A big point to differentiate is we've lending a lot of money to non-bank lenders. You know you read in the papers about buy now, pay laters, or these types of entities. We've actually done a lot of lending in that space in the smaller groups. We tend to bridge them, provide funding. They can get to institutions or get to the banks.
00:20:37
Speaker
So we've seen as a point of differentiation is that we're very, very good at that space and we've bridged quite a lot of non-bank lenders and investors got quite attractive returns. So we're seen as that's something we're quite good at. But I think we're good at just diversity of assets. The koala fund you mentioned, we've worked on an aggregation of hotels, an aggregation of farms. So it's very diverse on this kind of things that we can give investors exposure to.
00:21:03
Speaker
I find that really interesting to hear. You're in the non-bank lending space. We recently just did an episode with Lee Hatton, who's an executive vice president after pay. Learning about that space, I found, was incredibly interesting in the way that the financial industry is pivoting.
00:21:20
Speaker
I guess a similarity between alternative asset managers and institutional managers is identifying opportunities. How do you guys come across the deal flow? And I guess what are the key drivers to choosing to participate in certain deals or offering it to your clients? You know, are there certain financial characteristics that you look for or are there more general characteristics that you take into consideration?
00:21:45
Speaker
Yeah. We get a lot now from word of mouth as we've grown, and we get a lot of repeat capital raises. They've raised money with us two or three years ago. They'll come back to us. The large advisory firms would be showing us transactions and actually quite a large source of products actually from our investor base. It's pretty diverse how we're sourcing those leads.
00:22:08
Speaker
Yeah, great.
Diversity in Investment Interest
00:22:09
Speaker
And I guess as most of our listeners know, the aim of the podcast is really to increase our peers' knowledge and particularly women. So with that in mind, can you talk a little bit about your clientele and are you seeing an increased interest from female investors or is it still quite largely a male-dominated investor base?
00:22:28
Speaker
Yeah, it is still largely still male dominated. When I go across our database, you know, the large proportion of investors are male. What is changing is that we track a lot of statistic through our website and our referral channels. So the click throughs and activity from women is increasing quite a lot, which says that there must be something we have that's at least getting women interested, but they haven't seen to actually taken that next step to investing. But I think I mentioned earlier, I think as an industry, we haven't done a great job
00:22:59
Speaker
you know, with education on alternative assets. And we're working hard to improve that and we'll continue to do so because that's something we're passionate about as a business. And so my view is just basically we provide good educational content. And once we can build out trust with the investor base, which takes time, I think we'll just see a more diverse investor base flowing through, which, you know, ideally includes women and lots of different investors that we're not seeing at the moment.
00:23:25
Speaker
That's great to hear women are definitely increasing in terms of their interest in the space. You know, that's clearly an aim of our podcast to identify and promote talent and knowledge across the space. So it's great to hear you guys are also on board with that.
00:23:41
Speaker
You touched on this before, Travis, but a lot of your team comes from an investment banking background. Another aim of our podcast is to really help guide, I guess, younger generations in terms of their career path and all the different opportunities that are available in finance. Can I ask when you're looking for talent, what type of skill sets do you seek out?
00:24:03
Speaker
Yes. As a founder, it's very, very broad because as you're building up the business, you always see a gap and think I should hire there. I need that skill set. You got to be on your toes on how you hire. My general thing is I really like technical skills. I need my team to understand the detail. When I get a document, I want them to go through in detail because documentation is a key part of alternative assets. It's often bespoke. It's deep detail clauses you have to get right. I really love technical skills, attention to detail.
00:24:33
Speaker
Diversity is important. Groupthink is not of great value in generally business. You need people to ask questions and challenge. Network as in connectors. If you think about our business in a way, I'm looking for good product and I want to do DD on a broad universe of products. Who can originate and refer that product in? Then on the investor side, we're looking to build out our investor base. People who can network and connect, it probably pops up every time someone asks that question. Then good people with good reputations.
00:25:03
Speaker
you know, key part of business that I focus on, particularly on the product side, I want to know who they are, what's their background. So I know anyone that knows them, can I get a referral on them? Because it's just a background check of the people is one of the best filters in trying to, whether you do or don't want to do a product. Because it's, you know, in a smaller medium-sized business, you've got a choice, you know, who you want to deal with, and you might as well make sure they're good people.
00:25:28
Speaker
Yeah. So I guess don't burn bridges. Yeah. I mean, that's so, so true. Yeah. Awesome. So I think you've, you've really highlighted, I guess, some of the benefits of being in alternatives, definitely the competitive advantages that our partners have and some of the really interesting projects that you're offering your investor base. If our listeners are interested to find out a little bit more, what's the best way that they can get some more information or get in touch? I'd just call or message me or any of that team to be honest that we pride ourselves on.
00:25:58
Speaker
been pretty open and accessible. And it's a differentiator of a business our size over a larger organisation. You know, you can get in contact with us, you can have a chat with us. Yeah, that's why we're here. But I guess the standard one is our website, ourpartners.com.au. That's where all the information is, but I'm happy to have discussions.
00:26:17
Speaker
Now, before our last question, Travis, I would like to take this opportunity to thank our partners for supporting the Alpha Females Invest Podcast. It really has been fantastic to gain a deeper understanding of your business and I feel the concept of alternatives is really topical at the moment and investor interest is growing exponentially
00:26:37
Speaker
as you touched on at the beginning, which is fantastic to see. So thank you again for being a part of the show. But before we finish up, as we like to start every episode with one question, we also like to finish the episode with another question.
Advice for Young Professionals
00:26:53
Speaker
Travis, you've clearly had a huge career. You've been on the investment banking side. You're now a founder and entrepreneur. Can you tell us what's your best career tip for younger professionals in the industry?
00:27:05
Speaker
I've probably got a couple. You've got to continue to learn. Continue to study and challenge yourself. I think challenge others. Don't accept doing the way things used to be done because there's always a better solution. Probably the last one is don't respect hierarchy. My view is everyone's ideas are valuable. Just say what you think. Because ultimately, some of the greatest ideas have come from interns. As good of ideas has come from founders. I think you've got to speak out.
00:27:31
Speaker
That's awesome advice. I love that. Well, thank you so much for joining us on the show, Travis. It's been super interesting to do a deep dive into your sector and we really hope to keep up to date with all of the progress that you're making and hopefully next time we speak, you'll be at 2 billion or more. So thanks so much for joining us. Appreciate your time. Thank you.
00:27:52
Speaker
Thank you for listening to the Alpha Females Invest podcast. If you liked this episode, we would love your support on Instagram. You can find us at Alpha Females Invest. You could also leave a podcast review, but most importantly, please keep listening. See you next time.